Q1 2023 Ambarella Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Ambarella Q1 fiscal year 2023 earnings Conference call.
At this time all participants are in a listen only mode. After the Speakers' presentation there.
A question and answer session to ask a question. During this session you will need to press Star then your telephone.
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I would now like to turn the conference over to your speaker for today.
Louis Guyot Hardy.
Begin.
Thank you to Wanda.
Good afternoon, and thank you for joining our first quarter fiscal year 2023 financial results Conference call.
On the call with me today is Dr. Fermi, Wang President and CEO and Brian White CFO .
The purpose of today's call is to provide you with information regarding the results for our first quarter fiscal year 2023, the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results.
Natural prospects market growth 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.
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 filed with the FCC.
Including the annual report on Form 10-K that we filed on April 1st 2022 for fiscal year 2022, ending January 31st 2022.
Access to our first quarter fiscal 2023 results.
Press release transcripts historical results at T SEC filings and a replay of today's call.
As on the Investor relations portion of our website.
He will now provide a business update for the quarter and Brian will review the financial results and outlook and will be available for your questions.
Okay. Thank you Louis and good afternoon. Thank you for joining our call today.
During our first quarter, we announced the passing of the Kashi Eichler, who has been our CFO since 2018.
Casey's poverty positive demeanor was an inspiration to many of us.
And we are thankful to have an experienced leadership.
On March 28, we announced the appointment of Brian White.
As a CFO .
After two months, we're excited about the leadership and experience Bryan brings as we scale the company for the significant opportunities ahead.
Oh Q1 revenue was essentially as expected fly sequentially and up 29% year over year.
C V revenue grew significantly both sequentially and year over year, representing about 40% of total revenue in the old video processor business declined about 20% sequentially.
Our blended average selling price continued twice.
During Q1.
Pandemic play up in China, and the resulting lockdown disrupted customer production schedules and orders placed all of us.
Well its the logistics in that Greek greater Asia supply chain.
A majority of our customers' products are manufactured in this region and are subject to impact from China and related supply chain disruptions.
We've seen a similar degree of impact across both our automotive and Iot businesses.
For the complicating the pre existing kitting issues, we have discussed before.
Last quarter, we reported.
You reported a supply constraint for our 14 nanometer video processor sold six.
This time, we continue to expect a Q2 impact to remain at about $5 million we are.
And how confident you will see a Q3 and Q4 improvement in supply over 14 nanometer video processor Ace overseas.
As previously noted the supply of our computer vision <unk> has not been impacted.
We are very excited to announce in late May we received first silicon for C. V. Three Oh first central domain controller processor, and we have successfully pulled up the key functional blocks on this 10 plus billion for instance for associates.
There are some more bring lab work to be completed but we are confident that this first one.
Of course wrap won't be simple to over the summer to key customers and then well demonstrate significant performance and the power leadership.
As a reminder, CB three won't be a family of <unk> that we expect to come in a selling price between five times to 20 times, our current corporate ASP.
We remain focused on capturing the significant revenue opportunities in front of us.
Five nanometer products on schedule with the C V three closer to sampling and the C. D O first finding them either asos.
He is expected to commence mass production in the second half of the year.
We continue to expect <unk> revenue to be about 45% of revenue. This year and this richer mix is expected to drive our blended average selling price higher.
Interest and activity around our products and technologies remains very strong.
I will now provide some examples of our market development activity.
In the automotive market during the last quarter Ambarella announced its a success.
Success in sensing applications.
Highly new marquee phone company obligations, such as Adas and driver monitoring as well as a new viewing mark is likely electronic meters.
And the Japanese OEM Honda to over their children eventual companies introduced E V models, using our <unk> Aqa Sophie for Multifunction electronic mirrors plus drive recorders.
So how does E S. One EV and the GAC hung out some E N P. One easy both use the solution.
Also during the quarter you see a Japanese OEM introduced through a joint venture company its new <unk> <unk> based on our C. V 22, Aqa Sophie <unk> enables the intelligent driving assistance to say use utilizing a front facing camera supporting.
Lane departure warning.
We remain optimistic about the vehicle in cabin monitor assistant opportunity for us in.
In June we expect QD to announce a new passenger vehicle utilizing all the C V 28, Ecu for driver monitoring.
Don't feel what we're the largest commercial truck Oems in the war <expletive>, it's new T. F 70, 60 truck utilizing a single C. V 22, Aqa Soc to support multiple cameras and the multiple functions for driver monitoring around vehicle monitoring and blind spot detection.
In AI O T market, our small business, which we have referred to us C. D wave two we.
We are pleased to announce vivek.
Another major <unk> customer.
You may visit a mouse for new products, including outdoor indoor and Toby I'll cameras and a spotlight.
Over the cameras implement our C V asos to execute Veeva as intelligent <unk> for a variety of our people and the packaging packaging detection and tracking functions.
The spotlight use of the vest of detection algorithm over the Aldo camera can illuminate intruders and follow them as they move around the property.
Okay.
In the Iot market the largest portion of <unk> revenue, so far being realized from new product cycles in our enterprise and public security camera business, where the trend continues with the vast majority of all customers design activities involving our CVR some fees.
No.
C West security experience in March.
Every major security camera company.
Was demonstrating new products based on our CV agencies.
They will also maybe public demonstration at ISC west of companies entering the access control market with system based on our reference designs.
The access control market is a great example of how our CD portfolio allow us to reach entirely new markets with the not served before and access control is one of the areas, where we are showing encouraging early cosmo customer wins.
You can access control Motorola solutions announced the new open back open path Pearl serious video intercom readers based on all the CV trials 25 <unk>.
Either combines video audio and enterprise co routing.
<unk> has made a number of acquisition in the last few years two languages I O T camera expertise into new verticals and open path is one example.
We are proud to report that most of the camera companies acquired Motorola are using umbrella <unk>.
To help them grow their business.
Also in access control based on our C. V 22, real networks announced safer scan a populous biometric system with anti spoofing based on the fusion of a structured light and the cameras to ensure the most accurate.
During the show of targeting the enterprise and probably markets high Watermark, we announced two new AI powered the multi sensor camera Apis on our CV, each way southeast and featuring deep learning based object detection and classification.
Also in the enterprise and probably Iot market April fully part of Panasonic introduced its new multi sensor a serious camera, which is based on our <unk> offering deep learning intelligence at the edge with pre installed <unk> applications and the ability to add third party.
Applications.
In public safety fleet market April also launching a full key panel panoramic from camera based on <unk> <unk>, two with the form factors and fill more budget to be mounted behind the wheel rearview mirrors on the windshield.
Factory automation is another greenfield market opportunity and during the quarter I Ripple introduced two products based on our <unk> two <unk>.
C. A stereo <unk> factory automation camera with precise measurement capability and the pull reader with a high resolution that people learning abilities.
In all the Iot market insight 360 introduce the one Rs action camera, but innovative consumer camera space on our H 'twenty two way Sophie and can shoot for K P. 60 video take 48 megapixel photos and includes AI driven editing to make featuring 360.
We flew to just simple.
Recapping this announcement a majority of the projects I just described CV based in this product our state of art video processing expertise is laboratory into new applications, where the camera instead of just enabling great human viewing experience is safe.
Same thing collecting tick and then making decisions.
A lot of incremental and specialized processing is needed to do this most efficiently and are highly bandwidth.
D flow AIA Soc providers for an increasingly diverse set of Iot sensing applications.
About half of this product actually squares represent a new product cycles in existing markets and the other half represents entirely new markets for us such as automotive sensing factory automation and access control.
We are in the midst of a very strong shift in design activity <unk> fees.
Long term, we expect to earn higher asps with CD products and the combination has a higher ASP and unit volume.
Expected to drive a premium growth.
We are confident that our strategy to address the makeup trends for security safety and automation, enabling our customers to innovate and transform their own business.
A rapidly how rapidly.
Expanding AI product portfolio serves the diverse secular growth opportunities emanating from these trends.
Now Brian will review our financials.
Thanks, Jeremy.
I'll review the financial highlights for our fiscal Q1 and provide a financial outlook for second quarter of fiscal year 2023 pending on July 31 2022.
I'll be discussing non-GAAP results announced that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results.
For non-GAAP reporting we have eliminated stock based compensation expense and acquisition related costs adjusted for the impact of taxes.
Revenue for fiscal Q1 was $90 3 million in line with the midpoint of our prior guidance flat to the prior quarter and up 29% year over year.
As expected a sequential increase in Iot revenue offset a decline in automotive.
Both Iot and automotive were up strongly on a year over year basis.
non-GAAP gross margin for Q1 was 63, 8% slightly ahead of the midpoint of our prior guidance range.
non-GAAP operating expense for fiscal Q1 was $39 8 million down 500000 from the prior quarter.
non-GAAP operating expense was $2 2 million below the midpoint of our prior guidance driven by the timing of new product development activities.
Our non-GAAP tax provision was 900000 or four 8% of pretax income and.
And we reported non-GAAP net income of $17 1 million or <unk> 44 per diluted share.
Now I'll turn to our balance sheet and cash flow.
Cash increased $30 million to $201 million driven by strong operating cash flow of $34 million.
Fiscal Q1 cash flow was aided by decreases in both inventory and accounts receivable.
Inventory decreased $4 million from 128 to 117 days and accounts receivable decreased 16 million from 45% to 28 days.
The substantial decrease in accounts receivable was attributable to our front end skewed revenue profile in the quarter.
We had three logistics and ODM companies represent 10% or more of our revenue in Q1.
WT microelectronics fulfillment partner in Taiwan that shipped to multiple customers in Asia came in at 57% of revenue.
Ciccone, an ODM, who manufactures for multiple Iot customers was 11%.
And the crude oil logistics partner, who primarily supplies multiple automotive customers in Japan was about 10% of revenue.
I'll now discuss the outlook for the second quarter of fiscal year 2023.
As you heard me describe the external environment remains complex and dynamic.
The supply chain already stressed with persistent kitting issues.
It is now also failing facing the rolling pandemic impacts in China.
Our guidance to the best of our knowledge contemplates these challenges.
We estimate our Q2 revenue to be in the $78 million to $82 million range.
Down approximately 11% sequentially at the midpoint.
We.
Q2, non-GAAP gross margin to be between 63, and 64% relatively flat to the prior quarter.
We expect non-GAAP opex in the second quarter to be in the range of $42 million to $45 million.
The sequential increase in Opex is driven by the beginning of an advanced five nanometer automotive grade C D associated development project.
Our fiscal Q2 forecast for Ambarella is non-GAAP tax rate is 4% to 6%.
And we estimate our diluted share count to be approximately $38 7 million shares.
Ambarella will be participating on June 1st and Craig Hallum Virtual Investor Conference <unk>.
Second at Cowen TMT Conference June eight that bank of Americas, TMT Conference and.
On June 9th Rosenblatts virtual AI scaling conference please contact us for more details.
Thank you for joining our call today with that I'll turn the call over to the operator for questions.
Thank you.
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Withdraw your question press the pound key.
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Please standby, while we compile the Q&A.
Yeah.
Our first question comes from the line of Joe Moore with Morgan Stanley . Your line is open.
Great. Thank you.
I Wonder if you guys could talk about the issues in.
In China in the coming quarter can you tell how much of it is.
Is there any demand side issues in there is it all supply side and you mentioned, it's broad across multiple customers is it sort of.
Chinese customers manufacturing, China multinationals, just any kind of more color you can give us on what the dynamics are of the challenges there.
Hi, Joe this firm so what we saw was that.
As of the end of March and early April when we start seeing the China Lockdown in Shenzhen, Shanghai, and almost I spend time with sourcing our global customer base start to push all the acute leukemia.
We believe the reason I won't give a was that.
With our kitting issue persists and also that the lockdown make a kidney issue a lot worse for our global customer base, particularly for those who are manufacturing in China.
Great Greater Asia locations and they were impacted the most and that's the scale that we're seeing.
In terms of demand you know at this point, particularly outside China, I will say that most of our customers are telling us they can sell almost everything they can build so I think the demand.
Outside China is a pretty solid in my opinion.
We believe that will continue to monitor this progress through this lockdown.
And we've all heard that the Shanghai locked out what probably expired on June one we are looking forward to see any updates on the market from a customer point of view.
Okay. That's helpful. Thank you and then in terms of the incomplete kitting issue.
Is that an issue that people arent ordering ambarella parts because they are waiting to get other things or is that an issue that they have inventory of ambarella parts because they can't get those are the things like can you tell how much of this is going to be an inventory burn off that's required versus just a pent up demand.
Well I think a portion of that is definitely there.
Or some kind of inventory in the sitting in the channel, but I do believe this lockdown is really.
When the customer find out that they they really cannot allocate enough other parts, particularly me back Paul Pemex, The Wi Fi in particular microcontroller for automotive.
That they decided to push out their Q2 demand too.
Initial quarters, so I think that the inventory situations like what we discussed before but this time I think that a lot of the push outs is based on the Keating issue.
Particularly with new kitting issuer, which is amplified by the lockdown situation.
Great. Thank you.
Thank you.
Our next question is from the line of Ross Seymore with Deutsche Bank. Your line is open.
Hi, guys. Thanks for letting me ask question, Brian Welcome to Ambarella I just wanted to ask about the duration side of this equation I know lockdowns and what Covid is going to do in China is going to do is kind of beyond my pay grade and maybe you guys don't have great visibility into that but what's your assumption beyond the July quarter, whether it be the Samsung side getting better as I think you alluded to.
For me or the persistence of the lockdown headwinds.
Well I think the major impacts on the last quarter is a locked out of highways and until even today. We don't have a visibility you know how fast this recovery will look like but you mentioned the central situation since on 14 nanometer, we still expect that the final.
Median dollar impact to us in July quarter, and but we expected that Q3 Q4. The 14 nanometer supplier will improve so I think this time, we are really talking about.
You know this China laptop closing a lot of our kitting issues.
For our customers.
And I guess as a follow up question to get into the model you guys are now just having the two segments. The Iot in the automotive side of things can you give us any color about the size they were in the quarter either as a percentage of sales what they did sequentially. I know, you said up and down but any numbers around that and then is there a difference in the guidance for the July quarter between the.
Two segments.
Yeah. So in Q1 automotive represented about 25% of our revenue with Iot at 75%.
As we look into Q2.
We expect both of those segments to be down.
<unk> equally in percentage terms.
So both down.
Double digits sequentially.
Got it thank you.
Thank you. Our next question comes from line of Quinn Bolton with Needham <unk> Company. Your line is open.
Welcome Bryan I guess for me are Brian just see.
Seems like it's a dynamic environment out there with the rolling Lockdowns in China and I guess my question is it sounds like customers have been delaying orders here in the near term because of these kitting issues do you guys have any sense based on your customer conversations whether you expect that to extend beyond the July quarter or do you think that as the rolling off.
Downs, hopefully come to an end that orders.
Start to pick back up.
I think when we talked to our customer.
We got a lot of uncertainty around that because they still don't know how fast because the lockdown situation, while improved we believe that if the lockdown.
And that is oh keeping issue.
Not getting any worse than right now we believe believe Q3 revenue should be better than Q2, and maybe even have better recovery in Q4, that's under a lot of assumptions, but how does how does kitting issue and the lockdown issue will continue or whatnot.
Got it that's helpful. And then I guess, maybe for me a longer term.
Question I know you guys have been talking about the opportunity around level, two plus design wins I know you haven't announced anything to date, but do you feel like you're making progress do you think you're getting closer to potentially a large level two plus when that I believe in the past you've said you expect to hopefully secure at least one if not more.
Full level, two plus wins this year.
So you know.
I think that the.
The OLED discussion people keep asking about our CB three and we believe that.
Announcing a CV three that is up and running and we are proud that we have brought up multiple functions in there we are.
Have a high confidence that we will ship it simple the CVT three with software.
Over the summer I think this will really keep our customer assess how real this project is and what kind of.
Performance in the power number that we can prove in a real silicon than just show up in our presentations. So I think that with the C. V. Three we are very optimistic about that we continue to make progress with our key tier one Oems on this design wins.
Thank you.
Thank you.
Our next comes from the line of Matt Ramsay with.
With Cowen Your line is open.
Yes. Good afternoon. Thank you very much.
For me I guess I wanted to follow up on what you were just talking about there with the C V. Three and maybe you could give us.
Sense of.
What the steps are from here. So you. It sounds like you have first silicon back you have some some bring up being done in the lab, there's obviously more software and buyouts and other work that youll need to do to get everything fully up to where you can sample to customers in the summer.
And what I'm interested in is just the next steps beyond that.
Where you guys could start to engage with customers with T V. Three demonstrates up live in labs and in.
What the timeline could look like potentially start to convert some of these I guess the part of the automotive funnel that you're going after into one business. So like what what kind of timelines are we looking at to where we could see something announced with C. V. Three in and what are the steps that are kind of in front of you to get there right.
Right. So I think you know maybe just talk about how much we would have done it with CB <unk> CB three silicon came back to our lab seven days ago English show peer to peer that one week time, we basically bought up all the fundamental blocks and making sure that the ship is not only alive when we can.
Stop doing software integration and then we start verifying all the performance number empower numbers quarter to a customer in the past and that we are getting all I'll cover this level getting harder and harder every day. So in the near ship after the simply to our customer the near term goal for us.
Is to bring up our of this lab software as well as actualized sulfur dwelling on the C. V. Three so we can do assistant level.
It's not really just to show that the.
Competency as it was ability of the silicon television.
<unk> I think that's a major milestone people because if you'll talk to all the Oems that today. The biggest question for that is not only just whether your silicon can perform but also worthy of sulfur that can match, you can really leverage and to deliver the best performance and the that we have a both a visit that.
A complete software stack for autonomous driving all the way to level, four and as well as actualize.
Centralized radar processing capability I think that's our next important milestone in the near future to turmoil.
And hopefully that we're still targeting year 'twenty five 'twenty six.
<unk> was our customers.
Got it thanks for that for I mean thats helpful.
Real quick sort of follow up to that one.
And for my second question I guess, a quick follow up is as through this summer any sense of how many customers you anticipate sampling CB three two I'm just trying to understand a little bit more about the breadth of the engagement and then I guess my follow up question for Brian .
Any way you can try to size the impact of all the logistics issues in China on the guidance for for July or I assume it's just $5 million for the Samsung impact and then if you if there's any quantification of what you guys think that impact is in dollar terms that'd be helpful. I know that's hard one to do but thank you guys appreciate it.
Yes in terms of the CV three simple I will believes a double digit customers.
Yes, and in terms of the impact associated with the supply chain disruptions in China.
Thank you our guide is down about 11% the midpoint and that would.
That's really all attributable to that factor.
Thank you very much.
Thank you.
And this comes from the line of David Kelley with Jefferies. Your line is open.
Good afternoon, and thanks for taking my questions. I believe you noted seabee mix for the year are still on track for for 45% of sales. So can you talk about the lockdown and supply chain disruptions specific to see if.
If youre seeing any less or more impact there.
Maybe demand trends.
Throughout the last couple of months.
Yeah, I think that.
It was locked down and keeping issue impact both Iot and automotive equally but also apply to a video processor and computer vision chip equally and but we've also particularly which part of like an impact more than the others.
Also we believe that the kidney issue right now it's really as you know.
It can't happen to any product line, because it's really for example post video processor and as well as us computer vision, neither palm P make or Wi Fi or a microcontroller to complete our product.
Okay got it that's helpful and I might've missed this I apologize in advance, but could you provide a bit more color on the kind of the drivers of the opex cadence.
Here into the second quarter guide.
Yes, we see that Opex would increase coming in the second quarter, which is really driven by.
Our new CV five nanometer project Thats, beginning and that's starting to kick into the to the Opex.
Okay perfect. Thank you.
Thank you.
Our next question comes Tristan <unk> with Baird. Your line is open.
Hi, good afternoon.
I know theres been some questions have you seen already on the impact of the July quarter guidance, and you've reiterated the mix of TV, 45% of quality.
Previously.
We said that TV wasn't you will double this year.
Assuming that the Lockdowns go away on June 1st, notably in Shanghai, how much of your second half concerned about.
The top line rebounding sequentially.
Oh, I guess impacted by weak consumer.
Demand in China.
As opposed to a component shortage and like MCU and Wi Fi what do you think is the biggest.
Nick or uncertainty after the Lockdowns impact goes away.
Well I think that.
Why total customer b.
Beyond Q beyond Q2 would go into Q3 and Q4 I think the answer is really about uncertainty.
They say they relax the lockdown onshore first or how fast the production line can go back to normal stage how quickly. The production can start working to full speed I think all of that needs to be answered and that's not only just the components side, but also our customer side. So there is a skew.
Uncertainty in Q3, and Q4 in terms of China demand I really think that the China economy that we.
We see is definitely weak, but we have a roughly 15% of our sell too.
<unk> four cell products are consumed in China. So I think we are right now more focus on to understand the demand situation outside China.
Said in a previous answer I think that the outside China I think all demand still are strong.
Okay, Great and then as my follow up question.
How should we quantify the Wap at TD five in.
In the second half, which I think you've said previously initially is going to go into consumer is that as well impacted.
By the current shutdowns or is this going to be material in terms of lifting your second half versus first half.
Right now because of also most of the <unk> products are still in design phase and the revenue read Bob will be happening in Q4, So I think that the lockdown or the development cycle are not severely impacted yet.
We are watching it we are still confident that several of our customer <unk> customer will take <unk> into production, particularly on the security camera side and this was what I can say customer we don't keep a consumer we put it all in the past consumer product into the Iot. So I think multiple AI Iot customer will take.
C V VI into production in Q4 and start ramping off on there.
Great. Thank you very much.
Thank you.
Our next question comes from the.
Scalia with Marin Burke your line is open.
Sure.
Hey, guys.
Wanted to talk through maybe the dynamic might be seeing in that.
If you have all these supply chain constraints youre customers are seeing.
I wonder if customers that have yet to really.
Move forward with implementing AI in their products.
Sort of speed that process up.
Move kind of to the Nexgen AI stuff.
Rather than kind of continuing to.
Purchase.
And develop or maintain none.
More so human viewing application.
Yeah. So.
I think independent of this lockdown and also the kitting issue, we did see that most of our customers new products CV based of course, there are still new projects based on video processor, new product I mean, that's a kick off in the last several months, but in terms of percentage you will see higher and higher SKU CV.
Our SKU base the product I'll kick off.
So amongst.
Yeah Okay.
Okay interesting can you and maybe one for Brian .
You guys have had in your press release.
Statements about stock repurchase that you approved in an extension I wonder.
You know where the stock is and where the valuation is relative to all the C. V. A development if share repurchase becomes more of an area of capital allocation going forward.
Yeah, I don't think that there's really a change to the strategy or thought process around repurchases. As you mentioned the board did extend the existing $49 million authorization for another year.
We have had strong cash flow, we believe we have sufficient liquidity.
So we did consume around $300 million for the purchase of <unk> and the radar technology late last year. So at this point, we still view the repurchase option.
As being an opportunistic alternative.
Rather than something that has changed from a strategic perspective at this point.
Okay. Thank you.
Thank you.
Question kind of line of Kevin Cassidy with Rosenblatt Securities. Your line is open.
Thank you for taking my question.
This quarter you had a.
To the Japanese automotive distributor was a 10% customer last quarter they were at 12% customer.
Do you expect them to stay as a large customer and maybe what kind of service that they provide and maybe if you could just give us a little more description of your relationship with them.
Yeah. So.
I think of that.
So how could they are basically is all Japanese automotive distribute it.
And basically almost I think almost all of our Japanese automotive business is going through their service their services just providing.
Two things one is the logistics basically making sure that chip is deliver properly and we collect cash for us on top of that another important.
Function they perform for us is really providing.
Inventory for the automotive customer.
Because I think all of our Japanese customer because they want to make sure. There's no supply issue. So they require their distributor in this case, a kudo to keep anywhere between six to eight weeks of inventory for their production and they are definitely plan to pursue this at the end of a project.
And that's the main function so.
Well, the because the Japanese auto business continue to.
So for US we believe Cooper will continue to grow but.
Quarter to quarter point of view, the upland cannot be really minor truth, because there's some project ramp up some project ramped up but if you look at Australia, I Hope I believe our Japanese automotive business will continue to grow.
Okay, great. Thanks for that answer.
Also ocular could you give us a little more description of what you know.
What progress you've made in the past quarter.
So we began to separate out the ottrelite disclosure, but it's very consistent with what we said when we acquired that we believe this year, we got it to roughly $3 million to $4 million of business. It was also like most of them are still at the module level and I'll argue level. The first major production will happen next year.
And in terms of automotive customer we have.
Now that product yet.
So that's all we are doing for hardware.
Ty I think all those things everything I, just said is it based on.
<unk>.
This is before they got acquired after the acquisition with a major goal is to integrate uplifts over into our CV family Chip, particularly CV three so that we can provide integrated audio oh, sorry, the radar and the video solution to our customer that has to be.
Main focus for us and that will also be a long term revenue source for us.
Okay, great. Thank you.
Thank you.
Question comes from them.
Line of Torrey Van Berg with Stifel. Your line is open.
Yes, this is Jeremy calling for Torrey.
First just a quick clarification.
You mentioned.
Our percentage of products of your revenue that is consumed in China was at 50 or 15%.
One five.
One five okay, that's what I thought.
And then secondly in terms of the inventory.
It was down sequentially, both dollars and days.
Is this something that.
Was intentional or was it was this part of the impact of the <unk> 5 million.
Constrained.
Or is this something that you're kind of managing a little bit more on the long term basis, that's help us understand your inventory strategy here.
Sure. It was really driven by our ability to get materials during the quarter as opposed to act.
Active effort to reduce inventory levels, I mean longer term will look at targeted.
Targeted inventory levels.
Potentially lower levels within the current environment.
We're trying to have sufficient inventory on hand to SaaS.
SaaS customers in a very dynamic environment, so that decrease was not.
Driven intentionally it was driven by our ability to get materials.
Great. Thank you and.
I guess, maybe a little bit of a longer term question looking at some of the new markets that you're just entering whether its automotive factory automation and access control.
Would you or maybe just looking at the latter team since automotive seems to be its own one category King.
Maybe wait, which one you see ramping sooner and in which you know, which one might have a larger tam.
Well in terms of a larger Tam I think that the mobile robotics, obviously is the largest one in my opinion.
In terms of happening faster.
Revenue I think access control is probably the candidate, but however, I think the point we tried to make is that we continue to see new verticals that we can address with our CVA saucisse and hopefully of course, what we are focusing on all of them, but I think that we are have a high hope on the mobile robot.
Optics or because of the revenue potentials.
Yeah.
Thank you.
Our next question comes from the line of <unk> Desilva with Roth Capital. Your line is open Hi, Fermi Hi, Brian I should be talking to you again best of luck in the new role.
Brian on the Opex. The R&D you talked about the five nanometer project I'm wondering is there any kind of sizable tape outs involved in fiscal 'twenty, three time frame, which may not recur or is that too aggressive assumptions about a year over year trend.
Yeah, when I look at street expectations.
For Opex for the fiscal year.
I think the consensus is somewhere around $171 million to $172 million in total for the year.
That's probably a reasonable range to think about.
Okay.
And then one for Fermi I'm on the CV three can you help us understand the design cycle, there I mean, presumably its longer given the level of integration and effort on the part of the customer with radar and other things can you give a sense of how much longer that design cycle might be versus the other CV products as do you start having customer sampling in the middle of the year right.
Right.
<unk> three is designed for automotive market just by definition that you take longer and <unk> III, particularly complicated because not only because of huge tie, but also very complicate sulfur in the equation. So I think we think that our full year's design cycle is probably right. The first two years, probably just on a sofa.
And those integration in the last few years is really qualification and the clarification. So I think that that design cycles, probably standard for automotive market I think that's what we'll be CV Teresa T lifecycle.
Thank you.
Our next question comes from the line of Gary Mobley with Wells Fargo Securities. Your line is open.
Yes.
Hey, guys, let me start out by saying she will be missed and welcome to the call Brian .
I have just one multi part question and that relates to.
You know your Samsung relationship can you give us some color on what was the issue with respect our 14 nanometer constraints and the reason I'm asking is.
Just to try to assess the probability of future re occurrence of the issue and as it relates to perhaps some of your purchase obligations with Samsung.
Given the weakness in revenue is this going to be a situation, where you're gonna be forced to maybe carry a little bit extra inventory than you hope for or is that even an issue.
Yeah. Thank you so for the 14 nanometers, although we didn't get a clear answer about exactly what happened my gut feeling is that if somebody took that inventory will fall away from us by paying a lot of money.
So I think that's the reason.
So that's a big that's.
That's a problem that I need to talk to a central about and definitely setting out meeting with their CEO trying to.
Talk about not only the short term probably bus also the bolt on collaboration.
For example, if we need to go into this automotive business negotiation was customers that our foundry partner, obviously play a major ruling there.
In terms of our inventory level I don't believe that we need to take out a lot a lot more inventory than we have today, we don't plan that.
So I don't think that's a competitive issue that we need to worry about in the near future.
Thank you.
Thank you. Our next question comes from the line of David O'connor.
N P. Farah boss your line is open.
Great. Good afternoon. Thanks for taking my questions, maybe one for Permian one for Brian .
Hum.
Firstly on the M D edge AI partnership with momentum can you talk for me around the traction you're seeing on that and the strategy kind of going forward on the AG are you do you have all the building blocks and sulfur in turn need to kind of support all of those different end markets or are we going to see more partnerships like.
This momentum partnership from you going forward.
That's my first question and then maybe one for Brian on the ASP I think I started the call you mentioned the CD three family U S. O sees with an ASP range of five to 20 ex the corporate average.
Can you give us just an example of the functionality type for that slide backs versus the 20 X that kind of redundancy or is it an L. Three versus alcohol, you've just conceptually how we should think about that.
And the range of Asps. Thank you.
Right so.
I think let me answer that.
The ASP problem.
When we talk about <unk> five times <unk>.
ASP.
I think that.
It's really referring to C V. Three family of chips inside the CBC is a chip that we tape out.
Okay. Examples, but we are planning to simple to build a family of C. V. Three fallen low end to high end. So in the low end can be level, two plus market middle income Pcbs.
With three in hiring for C level four so you can imagine that the ASP for <unk>.
You should keep a market can be different based on the current price quote given to a customer we're seeing a five times to 20 times.
Our selling price versus our current corporate ASP and it's really about function performance not to bother you told us yet.
The other problem is.
As Bob mentioned.
Our partnership with all the sensor sensor company.
When we introduce <unk> three.
We mentioned that we want to be the domain controller, which means we have to integrate multiple sensor modality into a chip for different applications for the partnership with this momentum it's really about integrated structural I into our solution for access control market and we've done very well in terms of appeal.
Being a reference design and the winning design win with that and we are very happy with our partnership with them. They have been very helpful to help us to do to solve a lot of <unk>.
Design and production issues and.
The software point of view, we really identify all of the software partner, we need to have to.
Provide this rapidly move.
Moving forward I think they will be more and more of these kinds of cases, we need to address many more sources of mortality, we need to integrate from Templeton.
Thermal sensors or lidar sensors, all of a sensor. We continue we believe instead of acquiring all of them, but I think our approach will be.
Working with our partners like Bloomington and to interface, our CV chips.
So as to their sensor modules and then we can.
Adding values by providing software solution on <unk> III. So that's our strategy and we definitely continue to look for other sensor.
So without e-commerce.
Thank you.
Our next question comes from the line of Brian Rottenberg with Imperial Capital. Your line is open.
Yes, thank you very much.
You mentioned in your commentary about the.
The traction youre getting on the security side with visit specifically can you talk about other traction youre getting on the security side in the quarter and are you able to more easily procure chips for the residential security industry versus other verticals.
Yeah. So.
Or.
We call the consumer security camera, all security camera for home, we announced a ring and dividends of two major customers. We expect more in the future in terms of a supply chain issues, while we see a similar impact for all our customers. For example, I think although the wing is huge company they really have.
Our power to do.
Dubai components, we also see that have some limitations on the supply side. So I think that the key thing issue and the supply chain issue impact impacting everybody says it was different scale.
Is there a second part of that.
Yeah.
Thank you. Our next question comes from the line of Martin Yang with Oppenheimer.
Hi, Good afternoon. Thank you for taking my questions. So a question on CVT three potential customers that was simple can.
Can you talk about the geographic breakdown, how that compares to your current automotive customer base.
I think that's going to be very similar we're gonna simple probably everywhere.
U S Europe , Japan Korea, China.
Oh, sorry identify customers that we probably or simple truth.
Thanks Ronnie.
That's all for me.
Thank you.
Next question comes from the line of Richard Shannon with Craig Hallum. Your line is open.
Well thanks, guys for taking my question affirmative first one for you maybe you could talk about the competitive dynamics that you're seeing so far and expect to see with the C V. Three chip.
In terms of some of the new sensor modalities like radar generating and then also maybe compare that with the competitive dynamics with past chips going into less complex use cases love to hear your perspective, there right.
Alright, So I think I can say that <unk> three is really competing in many different verticals.
Have all kinds of different performance on price. That's why we believe <unk>, we need to have a family of C. V suite ship to address all of them.
You make about radar site I think you know.
There are a lot of radar company out there doing.
40 injuries.
Image radar like NXP Infineon and also there are some newcomers coming up with the solutions.
I think what we really different differentiation based all approach oxalate has this algorithm first approach to really try to minimize the number of antenna and RF chip you need.
And to achieve similar great outperformance with that that really allow us not only building a high quality cost effective solution, but also make the centralized radar solution possible in the future, which means that also allows that we can really have a sensor fusion between video and radar heightened on ascension.
This is a unique offering that we think we can we will differentiate against everybody else.
On the C V. Three domain controller competitors, I think that all because competitors Nvidia and Qualcomm.
We believe that we can stable 73, we will be able to show our performance and the power of vantage that we talk about your presentation and were waiting too.
Eager to find a way to handle that to all customers.
Okay perfect I appreciate that perspective for me, maybe one for Brian here as we think about the the goal of hitting a 45% of sales this year.
I think it's a fair assumption to think that the Iot segment as.
It's higher relative to automotive.
Would it be fair to think about that Iot segments already being or close to 50 50.
<unk> already.
Sorry can you say that puts you secondly, you were talking about.
Yes, so just wondering if if the Iot segment.
As is or close to 50% of sales coming from CV already.
Right. So in fact that.
For the Iot portion professional security camera, probably as close to 50%.
Other Iot level is not yet think about you know last year. It was only 25% so we need to grow to 50%. This year. So by the end of year I would say probably.
The professional security Sacramento will probably close to 50%, maybe a little more but other areas will be a way below that.
Okay perfect. That's what I was looking for thank you for me that's all for me.
Thank you.
Thank you.
I'm showing no further questions in the queue I would now like to turn the call back over to Dr. Fermi Wang for closing remarks.
First of all thank you for joining us this afternoon.
The fiscal year 2022 'twenty three is bringing some unexpected external challenge to us.
But I'm really glad our CV momentum remained very strong and particularly excited about the technology development progress, we made with <unk> three and the business development with CV five this true financial neither chip will provide significant opportunity for ambarella for all of our markets and with that I want to thank to all our state.
Holders and especially our global base of employees, who continue to support us. Thank you I'll talk to you next time.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation now disconnect.
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