Q2 2023 Ambarella Inc Earnings Call
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Good day, and thank you for standing by.
Welcome to Ambarella third quarter 2023 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone.
I would now like to hand, the conference over to your speaker for today. So what's their Hardy you may begin.
Thank you Andre and good afternoon. Thank you for joining our second 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 primary purpose of todays call is to provide you with information regarding the results for our second quarter of fiscal year 'twenty to 'twenty three the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results financial prospects market growth and demand for our.
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 and we're under no obligation.
These statements.
These risks uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results.
Are more fully described in the documents we file with the SEC.
Including the annual report on Form 10-K that we filed on April 1st 2022 for.
For fiscal year 2022, ending January 31, 2022, and the Form 10-Q filed on June eight 2022 for the first quarter of fiscal year 2023.
Access to our second quarter.
Fiscal 2023 results press release transcripts historical results SEC filings and a replay of today's call.
Can be found on the Investor relations.
One of our web site.
Jeremy will provide a business update for the quarter, Brian will review the financial results.
Then, we'll all be available for your questions.
With that I'll turn it over to Fermi. Thank.
You Louis and good afternoon. Thank you for joining our call today.
Q2 results were mostly as expected revenue was down 10% sequentially and up 2% versus a year ago quarter CV revenue increased significantly year over year basis, driving our blended average selling price above $10.
We have a cumulative could we ship more than 10 million CVA saucisse, including more than 20% into the automotive market and we remain on track to achieve our prior estimate the CBO CV will represent about 45% of our total revenue for the year.
In Q2, we absorbed with awards from both the China, Lockdown and the 14 nanometer shortage and the incomplete kids remember a bottleneck or for many of our customers.
Collectively we should see some improvement from this factors in the second half, but our recovery outlook is tempered, but some customers are now reducing their inventory levels in particular, our lead time contract.
In July we commenced a global road show to leading automotive tier ones and Oems with a live demonstration of our <unk>.
As a reminder, <unk> is our first.
Central domain controller integrating in a single Malacca merlion.
Oh <unk> core competencies.
Including perception processing from cameras radar sensor fusion and the path planning as well as our functional safety and application software.
Just one month after the asos can out of the fab, we demonstrated full functionality across multiple live cameras to many global automotive Oems and tier ones.
The superior performance and efficiency as well as the scalability of our Acos you a map, we're clearly recognize that well received leading to many follow on development discussions.
Now, we expect to be able to share more about some of these customers engagements by the end of the year.
We are also proud to announce that <unk>. Our first to final O meter is Oc enter production in Q2 at least a quarter ahead of expectations.
We have three Iot customers about each purchase production volume in Q2, and we're engaged with many other companies developing their first products.
I will now provide some examples of our market development activity, where production has already.
Or is it expected to commence this year.
So you're probably introduce a 16th generation in 2023, Toyota Crown model, featuring a true channel digital video recorder based on Ambarella that CV 25 X AI processor.
Capable of recording from both the Ava assistant and electronic mirrors. The car recorder is supply by Japanese tier one decile 10.
BMW began shipping to dash cameras.
Models.
<unk> 3.0, and a 3.0 pool, providing both a strong and their rearview recording based on Ambarella is 822 video ecosystem.
<unk>, Kansas will be sold in over 80 markets with a Chinese version also including electronic toll charging features.
In June China based <unk> introduced its latest duration op class cars. The H five C band includes al two Adas system based on our CD 22, Ecu automotive asos and.
Supplied by tier one neusoft.
Also in June with China based <unk> introduces a whole Jeep SUV. The HEB include includes occupant monitoring system based on our CV 28 acre and supplied by tier one piece here.
And in yogurt, Israel based the CPA announced cherries, SUV will integrate Cps driver says Tms Ronny on indoor out of the <unk> 28, a processor.
The integration over the 27 28, and the drivers says sulfur utilized neural networks to offer a robust driver monitoring capabilities.
I will now talk about some of the new Iot product announcements.
Johnson controls introduced its first generation Elyse drive flex camera series, including meaningful Ptv and fully models.
Based on our CV 20 S AIA associates.
Also during the quarter Ubiquity announced is AI coolers camera base.
Our CV 25 S AI Soc before.
Before we got pixel camera included smart detection of people and vehicles.
Korean IP camera maker <unk> launched a full new eight megapixel six megapixel PTC cameras based on our <unk> 28, and the C V 22 associated.
The cameras are designed for wide area surveillance operations with a capability to identify objects and recognized faith at distance of up to 300 meters.
Japan, Japan, I true introduce a new two megapixel machine vision camera and add manufacturing sites and the pace of our CV 22 ASR Soc.
The camera portfolio automatic visual inspections and that supports 100 different types. For example, detecting the presence of cables and connectors different colors all the progress.
Or polarity electro electrical components.
Also in Japan, JBC introduces new Peasy 25, 10, videoconferencing camera focusing on live broadcast and recording applications, such as concerts and lectures beta and browse the C V 22 <unk>.
So.
The camera support for K P 60 video streaming 50 action.
The magic tracking and a wide viewing angle.
In all of Iot markets Athos 360 introduced two new products based on our <unk> two video associated with <unk> 360 sphere is access to aerie for a strong and walks by placing one camera or drone and the one below to create a seamless.
Spiracle image.
He was smart home Iot market <unk> 360 is link is an AI powered <unk> video conference device using a three axis gimbal design and powerful AI tracking automatic zooming and framing to ensure that the presenter is always center stage.
This representative engagement the majority of which are based on our higher value <unk> provide an insight into the early and the continued success of our strategy we have.
We have successfully leveraged our human viewing perception processing expertise into the larger machines 70 markets addressing mega trends, such as a security safety and automation.
This machine sensing unit opportunities are incremental and much larger than the human viewing market, we have and well continue to serve.
Furthermore, we are demonstrating we can capture more value in the sensing applications, one incremental processing functions, such as radar and other sorts of perceptions sensor fusion and the planning functional safety and application software series C. B three ties oldest functionality together.
So we are confident that we are implementing the right strategy and demonstrating early signs of our success. Despite the current market turmoil, we will continue to drive our organic R&D investment to fully realize these market opportunities leveraging our leadership position in the AI endpoint market.
With that Brian will now provide our prepared financial comments.
Thanks, Jeremy.
The financial highlights for our fiscal second quarter and provide a financial outlook for our third quarter ending on October 31 2022.
Obviously discussing non-GAAP results and ask 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 Q2 was $80 9 million.
Lightly above the midpoint of our prior guidance range down, 10% sequentially and up 2% year over year.
As expected by chain related disruptions were the primary factor in the sub seasonal performance.
<unk> Iot and auto revenue declined sequentially.
non-GAAP gross margin for fiscal Q2 was 64, 5%.
Above the high end of our guidance range of <unk>, 63% to 64%.
Our gross margin outperformance was driven by a higher mix of NRT revenue than originally expected.
non-GAAP operating expense for the second quarter was $44 2 million.
<unk> to $39 8 million in Q1.
This was 700000 above the mid point of our prior guidance range of $42 million to $45 million, driven primarily by engineering materials for new products.
Our non-GAAP tax provision was 361000.
Or four 5% of pretax income.
We reported non-GAAP net income of $7 6 million or <unk> 20 per diluted share.
Now I'll turn to our balance sheet and cash flow.
Cash and marketable securities decreased by approximately $3 million.
As unusual working capital benefit in the prior quarter reversed and metrics normalized.
You will remember that in the prior quarter accounts receivable benefited from a front end revenue scale and inventory declined.
For fiscal Q2, DSO increased to 43 days from 28 days and days of inventory increased from $1 17 to $1 25.
We had two logistics and ODM companies represented 10% or more of our revenue in Q2.
WT microelectronics, a fulfillment partner in Taiwan that shifts to multiple customers in Asia came in at 59% of revenue.
Kony, an ODM, who manufactures for multiple Iot customers was 13%.
I will now discuss the outlook for the third quarter of fiscal year 2023.
While we expect some improvement in the second half from abroad supply chain disruptions.
We are starting to see some customers reduce the amount of inventory they are willing to carry into year end.
In particular as component lead times contract.
Our guidance to the best of our knowledge at the current time contemplate these challenges.
We estimate our Q3 revenue to be in the range of $81 million to $85 million or.
Were approximately flat to up 5% sequentially.
We estimate Q3, non-GAAP gross margin to be between 63% 64%.
We expect non-GAAP opex in the third quarter to be in the range of $44 million to $46 million.
With the increase compared to Q2 coming primarily from increased head count and sales activities taking place during the quarter.
We estimate net interest income to be approximately $400000, our non-GAAP tax rate to be in the range of 4% to 6%.
And our diluted share count to be approximately $39 million.
<unk> will be participating in the Deutsche Bank Technology Conference on September 1st.
Credit Suisse Virtual Asia Technology Conference on September 6th.
Citi Technology Conference on September eight.
And UBS is virtual future mobility conference October 3rd please contact us for more details.
Thank you for joining our call today and with that I'll turn the call over to the operator for questions.
Thank you.
As a reminder to ask a question you will need to press star one one on your telephone.
Please standby.
The Q&A roster.
Yes.
Our first question comes from the line of Matt Ramsay with Cowen Your line is open.
Thank you very much good afternoon guys.
Congratulations from me on sampling CV three.
Morning.
To ask if you could give us a few.
Updates and anecdotes as to how the sampling is going with customers.
Maybe how many customers have formally sampled what those engagements have been like in sort of the early performance feedback on the part relative to what you guys had.
I had modeled in is how the software portals.
<unk> are going with the customer samples.
Right.
So first of all we doubled.
To Oh, maybe roughly two thousands of customers, including tier ones Oems I think there are three important takeaway if all of them was first of all all of the customer.
Very impressed I would give a very thorough demo four weeks after the chip comeback qualify the demo we gave was.
You know our live sport with series III sitting in the Middle and we're taking multiple camera live video and live video goes into.
<unk> three and we took our standard image processing for all of the cameras and the process of video went to both our compressor Ngls at Wassa CV flow engine and the <unk> engine running multiple different neural networks, that's important for the economy driving.
We.
All the video went through their neural network processing and the end result, both through the process of video plus the noon hour results at display on a TV monitor. So you can imagine that this is a very thorough Panama, who pretty much tortured over all of the important date I'll pass over to this big tie.
We can do that.
In four weeks after the chip came back it shows you that not only we have a stable share but also our fundamental sulfate side is good enough and a solid enough to give a lifetime.
I think all our customer are surprise center.
Glad to see that.
The second thing is the most important is the performance like you said in France before that we said.
Most series III.
CV three we told them our customer list.
Performance expectation they have and in fact that we hit those expectations right out and then we get a surprise.
With our real chip.
And in fact, that's a speaks for price with them because they.
They are used to see people given the higher protection on the data.
Presentation and for the Rio Chip show up the performance a little lower but in our case, we definitely dever.
Advertised for seriously.
There's a second takeaway the third takeaway is the power consumption. We also give our customer protection the potential power power number and we hit that number we talk about so in summary, basically we show people that we have.
Chip that can run multiple times.
CV performance than our competitors it is.
A small portion of our power consumption.
She is a lifetime ocean power Powerpoint.
And patient anymore. So I think that is really.
Key to our customer.
Given them very good impression about our series III.
The next important milestone is to provide our.
However, an SDK software SDK for our customer to do software development and also.
And the porting their neural network. So I think that's up slightly in progress and we are engaging cosmo as we're speaking so hopefully that will continue to be able to report more and as I said in my script. We believe that we won't be able to give you more updates on our customer engagement by the end of year.
Thank you for all that for me that that's really helpful and congratulations on the progress.
That's my follow up Brian I wanted to ask about some of the customer kitting issues and in your commentary about the potential for customers to want to hold.
Less inventory and into year end.
Any way to quantify what that impact is to maybe the second half of the fiscal year end.
Do you have any color on which geographies, which specific end markets.
Youre seeing that inventory.
Coming down or folks being willing to take less inventory.
Anecdotes there would be really helpful. Thanks, guys.
Sure well, we gave you our outlook for revenue for fiscal Q3, we're not going to venture out into Q4 at this point, but in terms of.
Where we're seeing this type of feedback.
It's with customers in various areas. So it's not.
Specifically targeted to a sale.
<unk>, Yeah, I think we're in a situation where.
Customers have been experiencing the supply disruptions for quite some time right and those.
Disruptions are beginning to abate to some extent, they're getting a little bit better, but theyre also looking ahead to some of the economic risks that could be on the horizon.
And the uncertainty associated with that and so there is I think a return to a focus on inventory management that maybe didn't exist for a period of time, particularly as we head into the end of the calendar year.
So we are getting some requests for push outs.
So in various customers and we're reflecting that in the guidance we provided.
Thank you.
Please standby for our next question.
Our next question comes from the line of Joseph Moore with Morgan Stanley . Your line is open.
Great. Thank you following up on that last question.
On the customer inventory stuff.
Talking about lead time contraction is that your lead time or is that lead times for other components and then I had a follow up.
I think Joe we're talking about both but I can talk about our own lead time changes.
At the peak Aldi towers at roughly 40 weeks now we are talking about roughly at 30 weeks.
And before Covid, our normal lead time was 24 weeks. So I think we are gradually going back to normal.
That's basically talking about all the time, but I think I think we also noticed some of the components are all components of our partners also are showing a little lead hand contractions.
Okay. That's helpful. Thank you and then in terms of thinking about October .
I know you normally get kind of a seasonal ramp in.
In the consumer centric businesses, both in surveillance and other consumer.
And youre coming off of a quarter.
Your revenues were depressed by the <unk>.
Foundry issue.
So are you still seeing that kind of seasonal impact and it's being offset by these other issues that youre talking about or is the impact that's hitting your kind of more on the more seasonal products can you just kind of describe it seems like theres, a pretty big falloff in and something if youre getting that normal seasonal ramp I just want make sure I understand.
Alright, so I think.
First of all those three so far.
Each year, we have been talking about although it's kind of a reduced price didn't go away, even if let's say that we believe will persist but lesser degree.
On top of that then we will just talk about the inventory reduction at our customers I think those two things thats, probably the major factors and also I think this is really unique here I think with all the supply chain situation that we're monitoring geopolitical situation.
I have to say I don't think that our normal seasonality of hiring this year.
Got it okay. Thank you.
Thank you.
Standby for our next question.
As a reminder, ladies and gentlemen that start one wants to ask the questions and we ask that you limit yourself to one question and one follow up.
Our next question comes from the line of perfect ARIA with Bank of America. Your line is open.
Thanks for taking my question I actually had a clarification and two quick questions.
Brian You mentioned there were some NRT revenue that helped to improve gross margins I was hoping you could quantify how much incremental and already in Q2 and what's embedded in your Q3 outlook.
Yes.
Yes.
So we don't break.
Break that out specifically, but just to give you.
<unk> for the company typically runs in the 1% to 2% of total range.
And in the second quarter.
Total NRT was kind of low to mid <unk>.
Digits in terms of millions of dollars of revenue.
And it's going to be lumpy as we go forward, but as we look at the near term.
Q3 fiscal Q3 for example, we see that.
Normalizing and returning back to kind of a typical run rate.
But I think as we go out further in time and we have more activity is associated with series III and so on it's possible that.
That starts to become a slightly larger portion of the overall revenue mix.
We're not quite there on a sustained level yet.
Got it and.
On the inventory reduction by your customers.
Is that more on the automotive side is that more on the Iot side because on the automotive side.
When I look at the results and outlook for most of the other automotive exposed semiconductor suppliers they seem to have been.
Pretty strong at least in the near term, obviously I understand that you know every company supplying different kinds of components that might not be exactly apples to apples, but I'm curious where are you seeing the somewhat softer demand signals is that more automotive or more Iot.
No I think youre right that we see a little inventory reduction on the automotive customer.
That's what.
There are 25% of total revenue for the balance of the business on the security Iot side particular security camera side, we do see that our customers are trying to reduce the inventory.
Got it and then finally, your overall inventory kind of stands out right because.
It has now reduced for the fourth straight quarter of it which is kind of an anomaly in the sector where inventory.
Our up for most of the semiconductor suppliers what is the right way to view the lower level of inventory on your balance sheet is it is it a signal of your demand outlook for the next two to three quarters or is it something else, but what is the right way.
To look at.
Sure being able to manage that.
<unk> levels.
Absolute dollars of inventory.
Yes, Eric.
Inventory has declined the last couple of quarters in dollar terms, but if you look at the second quarter. It actually was up in terms of days.
Because cogs was down in the quarter so.
We went from I think we were about 170 days of 117 days of inventory in Q1.
And we were about 125 in Q2.
So that's a relatively elevated level in terms of days of inventory for the company, but we've been running at a higher relative inventory level because of all the supply disruptions to try to offer ourselves from some of those generation. So if you think about it longer term if we can get.
All of these supply issues behind us and get to something.
More of a normalized state.
Expect we should be running under 100 days of inventory in the future.
Mr. <unk>, Thank you very much.
Thank you.
Please standby for our next question.
Our next question comes from the line of Gary Mobley with Wells Fargo. Your line is open.
Hey, guys. Thanks for taking my question I appreciate the disclosure about how your blended ASP is now trended above $10, but maybe if you can give us.
Some baseline.
In terms of thinking about it on a quarter over quarter basis year over year basis.
And how.
That compares to your unit growth.
So I think what we think we can say is that since we have set we introduce our CV part of line or.
ASP continue to grow and we expect that growth will probably continue.
<unk>, three or <unk> three family of products into a <unk>.
Production.
<unk> continued to expand.
I think the Union number wise I think these are two separate issues in fact, the where we lose the majority of that unit number is with the hydrogen dawah the asp's at very low <unk>.
He is probably the lowest ASP business in the last several years and we basically lost that business and so that also helps to improve our our ASP.
Companywide ASP, but I will say that the overall, our asps grow well continue base because of our CV flow potline.
Okay. Thanks for that color Permian.
I wanted to confirm that the Samsung 14 nanometer supply issue the lingering impact in the July quarter was as you approximated $5 million and wanted to be clear that that's no longer a headwind looking into the October quarter is that right.
Well I think.
First of all the finance in the July quarter as true and in October I think has much less but it will be considered when we gave that guidance.
Okay, Alright, thank you guys.
Thank you.
Please standby for our next question.
Okay.
Our next question comes from the line of Blair Botha with Arezzo.
Your line is open.
Hi, great. Thank you.
I had a question on 85 and I can see it has now entered into mass production.
Joe.
On the could you talk us through how you see the adoption of <unk> over the next 612 months.
Yes, so we can think about the revenue.
Do you see it.
Yes shelf adoption.
Could it be an import side of the business any color on how to think about the size of the Japanese payment would be helpful.
Right.
I think you should consider the <unk> five is our next generation high end CV for engine.
And the target.
The application is.
High end enterprise class security cameras, the enterprise video conferencing system as well as our whole application higher hauled occasion, so and.
Almost all of our security cameras Fort if lead to high end products. They are looking at <unk> five and some of them like I said.
While we are well taken that into production this quarter in multiple well take that into production. So it could have this year. So I think simplified revenue I think well start second half of this year and the ramp up next year.
Definitely help us on the ASP expansion as well as helping us to maintain our gross margin.
Yeah.
Okay, great. Thank you that's helpful. And then I guess, just as a follow up in terms of the key segments.
Tonight that I know you mentioned they declined sequentially in the quarter and could you give us any color about half the size and then of course, what they did is essentially failed and they ask please just to add to that looking at the KC guidance could we expect something similar for that technical with that thank you.
Can you repeat the question.
Yes.
Yes, So I guess just in terms of the two segments. If you look at Iot and automotive.
So any more color about the size of them and of course at what they did at the percentage of sales and then just to add to that.
Q3 guidance could we expect something similar in that type of cortisol.
Yes.
This is Louis speaking.
Auto and Iot roughly the same when you consider everything included.
Including the NRA.
The outlook for Q3 is to have.
Both of these areas growing sequentially.
Thank you.
Thank you please standby for our next question.
Yes.
Our next question comes from the line of Ross Seymore with Deutsche Bank. Your line is open.
Hi, guys. Thanks for let me ask a question here on the automotive side it.
It seems like it's been at about that 25% of revenue range now given the answer to your prior question. It seems like for three quarters in a row.
When do you expect that to really accelerate I know it would take longer in the EV.
The majority of that's been impacting to the benefit of the Iot side, but how do you think about the growth rates of the two segments and specifically automotive when when should we expect.
A stair step up or a bigger ramp given all the design wins that you've highlighted in the preamble Fermi.
I really think that.
The next important milestone for us in terms of automotive.
Our revenue growth is that one major OEM take Adas.
Level, two plus car into production right. So that's the really the key for us to provide long term growth I think although automotive revenue will continue to grow but I think the step function I'm looking for is really the.
As I said the phase.
Major OEM to take <unk> into the market.
Any sort of rough color when that may occur or is that something that you think you have the design wins or is that going to be more CV three dependent so it's a.
A couple of years out given the design cycles, and any sort of rough color on that.
I think CV to what give us some boost and but like we said in the past and <unk> because of the ASP will really provide the biggest jump for us, but I think between allowing the <unk> III in production that you should see continue to see our CV, our automotive revenue grow.
Okay. Thank you.
Thank you please standby for our next question.
Okay.
Our next question comes from the line of Sarah Sandberg with Stifel. Your line is open.
Yes. Thank you.
I know you are not going to comment beyond Q3.
Thinking about the lead times and the sort of inventory adjustment.
Do you think that you'll be down to sort of the mid twenty's lead times during the October quarter or when you when you talked about sort of going from 40 to 30.
That process started.
A little bit later.
Well I think 30 is now and whether it will move to 2020 for like before it was really depends on our supply chain.
I think it will take a while because of the steel I think of our high end process node.
<unk> will be a stable for awhile, so I wouldn't expect that to go.
Go back to 2024 immediately however, I think the trend is there and I think our customer is really reacting to the trend expecting that.
The lead that will go back to normal soon.
Very good and as my follow up can you confirm that you are going to be updating us on your sort of vehicle revenue funnel III.
Next quarter.
And since you're obviously not going to ship data now right now could you at least talk qualitatively or quantitatively about how that funnel continues to improve.
We definitely will give you update on the three point all in November .
Okay, any any comment qualitatively or less jumping the gun here.
I think.
Three months too early to talk offline.
Alright, very good so since youre not going to answer that question and I'll have one last one so.
So could you just elaborate a little bit on the supply chain dynamics I know you talked about the 14 nanometer, but I also know there's been maybe some potential yield dishes at 10 nanometer now that you are in production in five nanometer how do you feel the yield improvements are going on with your current supplier. Thank you.
Right. So you know there are a lot of news article about <unk> five nanometer.
But I think it's you know.
Based on our experience when we start working with Samsung five nanometer <unk>.
Bob.
But now we are ready for production and in fact, we are in production in Q2.
I cant say that <unk> is not a problem. He can be continued to be improved but I don't think that's a problem.
For us anymore, because you know we have been working with all our foundry supplier for many years and for any of advanced node is a similar experience at the beginning that the yields are low and we work together with our foundry partner to improve it and I think at this point I won't I think.
Finally on Omega yield is.
Definitely not.
Orange and can be.
<unk> improved.
In the near future.
That's great perspective, thank you.
Thank you.
Please standby for our next question.
Okay.
Our next question comes from the line of <unk> Desilva with Roth Capital. Your line is open.
Hi, Fermi Hi, Brian .
You talked about the CV and some of the implementations there and you talked about some NRA, perhaps can you just talk about how the design like how long design cycle. There is relative to prior products I know it sounds more software intensive and whether tier one auto tier ones would be part of getting that established through the.
The industry.
Yeah.
I think first of all.
The desire for any level two plus design win.
It's going to take probably three to four years to enter production in outside China inside China, or maybe a little faster than that but I think the.
From a design win.
Momentum I think we are talking to both the OEM the tier ones. We think that both are very equally important OEM. Once you make a decision and tried to control software, but still they need a tier one to television over the final product we need to work closely with our tier one partner to deliver those a final product. So I think we that's why.
We went out with that we will see me three we went out to both all the major tier ones as well as the major OEM to make sure they see the capability and the potential of <unk> three and so when they talk to each other to make a decision on the design wins that they will consider seriously.
Okay. That's helpful. Thanks, and then on the ocular acquisition radar can you just update us on what.
Expectations are for incremental fundamental contribution revenue contribution or how we should think about that over the next few quarters as you integrate that in.
Right. So first of all we didn't break out great.
Great.
Aqua radar revenue per quarter, but we give our guidance is probably a $3 million to $4 million. This year I think we're close to that and.
If we kind of continue to monitor the current progress we made with our current customer and we did talk about there are a few design wins and we're working on hopefully will see result.
In the next year and for the robot revenue.
There is another very important milestone I think you should track is what we can demo.
Alkali software running all serious seriously silicon.
Well probably.
The first first silicon platform that can do sensor fusion with video data and the radar data at the same time and that like I said before that's really important for us to provide not only just better perception the central figure into our customer, but we provide huge bond savings to our customers too so I think.
That also is a important milestone our trying to head.
Thanks, Brian .
Okay.
Thank you.
Please standby for our next question.
Our next question comes from the line of Kevin Cassidy with Rosenblatt. Your line is open.
Yes. Thank you for taking my question.
Just as you're looking at the opportunities for CB three is there a difference between consumer vehicles, and say robo taxis and shuttles is there a shorter time to market or anyone that might be.
Better suited for the C V free.
Well I think for both consumer and the commercial vehicle in outside China design cycles are probably similar because even for commercial vehicle people also want onto our.
Auto grade silicon hardware silicon and software.
Inside China is a little different and the people are more willing to intra.
Introduce product and ties.
<unk> in the market, so I think thats a different two different timing.
And definitely we will try to take advantage of the shorter.
Design cycle in China, where we can quickly introduce some product there.
Okay, that's great thanks and.
Going back to an earlier question is Aki like part of that in our revenue.
Yes.
Okay. That's expected to go forward also.
I think now we are engaging with a new customer after we acquire them, yes, we expect that workers comp, we're going to see new revenue opportunities with great also.
Okay, great. Thank you.
Yeah.
Thank you.
Please standby for our next question.
Okay.
Yes.
Our next question comes from the line and U S. Galleria.
With Bamberg your line is open.
Hey, guys.
Yes look into the quarter I think there is some optimism brewing around some.
Decision, making room bar with.
Automotive OE, you've just given the other announcements are some adjacent technologies.
Typically VW.
Yes.
Yes, I understand the inventory commentary.
What about what about your conversations with them.
Just generally in the automotive space around decision, making moving forward because as you said these design cycles.
You would think we should start to see some movement near.
Near term despite what we're seeing around the latest on that inventory side.
So youre talking about <unk> III engagement.
Yes, yes, yes.
Youre more so your latest technology latest shifts that you're.
Yes visibility would be great.
Yeah, So first of all.
The CB three engagement like I said, we have done well with the first phase of demos and we need to follow up with a lot of engagement on the engineering side to help customer to poor software to put the neural network and demo the system. So I think that's definitely important since high.
Future metric I should start.
We are developing the chips in the CDK family, So that we can address.
Current applications.
So for example, we are working on.
The other so they can finance silicon for auto grade chip is going to be enabling our customers go into production.
In 2025, 24, 25, and Thats definitely the chip that we are working on and we're going to continue to work on.
Different.
Derivative or CV chips and that is definitely important.
Our investment strategy for us moving forward I hope that answers your question.
Well I guess that was more so.
In terms of.
Being able to announce some design wins.
Just that we're seeing we're seeing some movement and we are seeing some decision making Billboard with some addition.
<unk> I guess.
Yes.
<unk> fit in there.
I think that you would start to start to see some movement.
Even despite these inventory pressure.
Pressures.
So I think.
In our script, we talk about we believe we can't give you more updates.
Before the end of the year. There are two thing we're going to give you indication why is weak.
We can in November we'll give a formal update which you could probably give you indications how are you.
How are we doing with OEM intensive highways as well as we're going to talk about symmetry engagement that we said probably by the end of the year, we will talk about that so hopefully that will come.
To provide you our input.
Okay, Okay, and then maybe.
When youre talking about customers around that.
Specifically the sampling <unk> III.
There are regionally any or any sort of bias you're seeing more interest in one.
Region versus the other but whether it be U S Europe or Asia or.
Early to tell.
In front of the amount of the 2000 customers over I think it's global and we talk to almost every place, including China, Japan, Korea, Europe and U S. So I think we probably told you the target customer that we want to talk to in our last few weeks.
Yes, Andrew just to give you some more perspective on what's at play here. This is our first central domain controller.
And so you go through a sequential process, where we have introduced the product idea to customers in the last couple of years.
It is firmly described.
We've gone through the demonstration process.
Almost several dozen customers on a global basis have now seen the board in.
Operating life and then the next step that we described is providing the SDK is an EBV case, where they can begin to port their own software onto the chip as you move through this progression of steps a series of steps.
Customers will feel more comfortable to make that decision and where we're still saying we expect to provide an update on where we're at by the end of this year.
Okay, alright, thanks, Louis Thanks, Jeremy.
Thank you.
Thank you.
Please standby for our next question.
Okay.
Our next question comes from the line of Richard Shannon with Craig Hallum. Your line is open.
Hi, guys. Thanks for taking my question I think just one question for me and following up on the topic of Q3 here well I know they are discussions and demos or early stage here for me I Wonder wondering what you see in terms of future discussions and competitive in sourcing dynamics with large automotive customers do you expect them.
To be choosing one domain controller across the entire portfolio or do you expect them to or to possibly use two or more in other words is this an all or none situation or is there a kind of a split situation over time.
No.
It's interesting because a lot of the company that we talk to.
Always start with they want to choose one because the sofa, but at the end I think they all understand the risk taking only one so I think I think.
Theres a chance that some people will take two and also there's a chance that someone will take one so between those two possibilities.
Okay, great well I look forward to get an update on that one but thanks for that perspective.
Aspect of that is all going to be firmed. Thank you. Thank.
Thank you.
Thank you.
Please standby for our next question.
Our next question comes from the line of.
Tristan <unk> with Baird. Your line is open.
Hi, good afternoon.
You've mentioned that the television side, we're just targeting the second half and into next year should we assume that TV side is going to be material to you whether you. The second half and is it material to your Q3 guidance or is it just an insured shipments and then it becomes more meaningful next year.
I will say that the meaningful revenue call for next year. This Q3, and Q4 will be a ramp up time for several customer, but I think maybe for revenue probably will probably more towards Q1 Q2 next year.
Okay, and then you've mentioned that as May.
Second question.
Some inventory deleveraging across customers, both on the automotive and Iot side and I just wanted to.
Get any color that you could provide specific to the China automotive market, how high our inventory levels right now.
And have you seen you know push outs.
Or delays either in terms of deliveries or new project.
How is the situation there and how do you expect it to evolve over the next several quarters.
It's all about China market right.
Yes.
Automotive automated.
So I think you know if you talked about China automotive.
I will say that you need to separate the consumer versus commercial vehicles, I think China commercial vehicles are facing a severe.
<unk> in terms of demand, which is smaller market.
On the consumer vehicle I think inventory.
Haven't seen we're still that market is still facing a show supplies and so that's why we haven't seen any.
<unk>.
Revenue reduction sorry, the inventory reduction in the Chinese consumer automotive at this point.
And when would you expect then this supply to get back in balance and would that create more of a slow down on your existing revenue base to the <unk>.
<unk>.
End market in China by then.
Aye.
Not sure because I don't know exactly what is the inventory level of our current customers.
For our chip I can't imagine a sound and probably build a little bit of inventory some people won't be conservative. So it's really going to be customer customer by customer discussion for example, even for Iot not all of our customized inventory problem and some people are more conservative in terms of building up inventory so the inventory.
<unk> reduction is more.
Minor for them, but there are some customers that being aggressive getting our inventory throughout two.
24 months and.
Definitely there is a longer time for them to digest inventory, so it's really customer to customer discussion.
Very hard to.
<unk>.
Normalize it.
Okay. Thank you very much.
Thank you.
Please standby for our next question.
Yes.
I'm, showing Kevin Cassidy and in the Q. So did you have a follow up.
No I didn't.
Thank you.
I am showing no further questions in the queue I would now like to turn the call back over to Dr. Wang for closing remarks.
And I would like to thank you for your time and your consideration today and I'm looking forward to see you in the coming upcoming events. Thank you guys.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Okay.