Q1 2025 Ambarella Inc Earnings Call
Okay.
Operator: Thank you for standing by, and welcome to Ambarella's first quarter fiscal year 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Louis Gerhardy, Vice President, Corporate Development and Investor Relations. Please go ahead, sir.
Speaker Change: Thank you for standing by and welcome to the upper realized first quarter fiscal year 2025 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered.
Speaker Change: I'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program. Mr. Lewis Your Hardie, Vice President corporate development and Investor Relations. Please go ahead Sir.
Louis P. Gerhardy: Thank you, Jonathan, and good afternoon. Thank you for joining our first quarter fiscal year 2025 financial results conference call. On the call with me today is Dr. Fermi Wang, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding our results for our first quarter of fiscal year 2025. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things.
Speaker Change: Thank you Jonathan and good afternoon. Thank you for joining our first quarter fiscal year 2025 financial results Conference call.
Speaker Change: On the call with me today is Dr. Fermi, Wang President and CEO and John Young CFO.
Speaker Change: The primary purpose of todays call is to provide you with information regarding the results for our first quarter fiscal.
Speaker Change: Fiscal year, 2020 five the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results.
Speaker Change: Prospects market growth and demand for our solutions among other things.
Louis P. Gerhardy: These statements are based on currently available information and 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 are under no obligation to update these statements; these risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results, are more fully described in the documents we filed with the SEC, access to our first quarter fiscal 2025.
Speaker Change: These statements are based on currently available information and subject to risks uncertainties and assumptions.
Speaker Change: Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect.
Speaker Change: Actual results could differ materially from these forward looking statements.
Speaker Change: Under no obligation to update these statements these risks uncertainties and assumptions.
Speaker Change: As well as other information on potential risk factors that could affect our financial results.
Speaker Change: Were fully described in the documents we file with the SEC.
Speaker Change: Access to our first quarter fiscal 2025.
Louis P. Gerhardy: Results, press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the Investor Relations page of our website. The content of today's call, as well as materials posted on our website, are Ambarella's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter, then John will review the financial results and outlook, and will be available for your questions after that.
Speaker Change: Results press release transcripts historical results SEC filings and a replay of today's call can be found on the Investor Relations page of our website the content of today's call as well as the materials posted on our website, our ambarella is property.
Speaker Change: It cannot be reproduced or transcribed without our prior written consent.
Speaker Change: For me will now provide a business update for the quarter.
Then John will review, the financial results and outlook and will be available for your questions after that.
Fermi Wang: Thank you, Louis, and good afternoon. Thank you all for joining us on our call today. Our Q1 results were 1% above the midpoint of our guidance range, with revenue increasing 6% sequentially. As expected, both auto and IoT revenue increased sequentially, and AI products were about two-thirds of our total revenue. As previously discussed, our customers are in the midst of recovering from a cyclical inventory correction, and the favorable impact from this is expected to carry into the second quarter.
Speaker Change: Perfect.
Speaker Change: Thank you Louis and good.
Speaker Change: Good afternoon. Thank you for thank you all for joining our call today. Our Q1 results was 1% above the midpoint of our guidance range with revenue increasing 6% sequentially.
Speaker Change: It was expected that both auto and Iot revenue increased sequentially and the AI products, where about two thirds of our total revenue.
Speaker Change: Previously discussed our customers are in the midst of a recovering follow cyclical inventory correction and a favorable impact from this is expected to carry into the second quarter.
Fermi Wang: We continue to expect our fiscal 2025 revenue to grow year over year, driven by both the cyclical tailwinds and the secular growth in our AI portfolio. The combination of the cyclical and secular forces is expected to enable our AI inference revenue to grow more than 30% in fiscal 2025. Zooming out for a minute, the significant capacity being added to the AI training network infrastructure globally both fall for the ultimate deployment of AI inference at an age when we participate in the market.
Speaker Change: We continue to expect our physical 25 revenue to grow year over here.
Speaker Change: By both the cyclical headwinds and the secular growth in our AI portfolio.
Speaker Change: The combination of this cyclical and the secular forces is expected to enable our AI inference revenue to grow more than 30% in fiscal 2025.
Speaker Change: Zooming out for a minute the significant capacity being added it to the AI training network infrastructure globally bodes well for the ultimate deployment of AI inference at an age where we participated in a market that deployment of AI inference at H enables a user to la Porte cracker.
Fermi Wang: The deployment of AI inference at scale enables end-users to more practically take advantage of so many different AI breakthroughs, focusing on AI as the age of networks increases. We see AI influencing proliferating in multiple areas, and we believe we are well positioned to take advantage of this. In fact, we are already in the early stage of demonstrating how it may play out for us.
Speaker Change: Really take advantage of so many different AI breakthroughs.
Speaker Change: His focus on AI at the age of networks increase we see AI inferencing proliferating in multiple areas and we believe we are well positioned to take advantage of this.
Speaker Change: In fact, we are already in the early stage of demonstrating how it may play out for us in Q1 for example, our customer engagement.
Fermi Wang: In Q1, for example, our customer engagement included our first passenger vehicle wins for our 5-nanometer CV3-AD family of AI central domain controllers. We added another CV3-AD win in the commercial vehicle market, and secured multiple enterprise-class AI inferencing wins. And even in other IoT cameras, we are reporting additional wins for our 5-nanometer CV5 AI. In the midst of this great change, our opportunity and the challenge is to develop AI technology and products that are not only extremely efficient for age deployment but also flexible enough to execute a very wide range of AI workloads across all these disparate applications.
Our first passenger vehicle wins for our finance to meet our CV 380 family of AI Central domain controllers, we added another <unk> <unk> in the commercial vehicle market secure that multiple enterprise class AI inferencing west and even in other Iot cameras, we are rich.
Speaker Change: Porting additional wins for our final meter per C V VI AI process.
Speaker Change: In the midst of this great change our opportunity and challenge is to develop AI technology and products that not only are extremely efficient for H deployment, but also flexible enough to ask you a very wide range of AI workloads across oldest disparate applications.
Fermi Wang: We are already in mass production with our AI products for video-intensive CNN networks such as detection, classification, fusion, planning, stitching, matting, tracking, framing, auto-editing, and the new network imaging signal processing. Now our third generation of AI technology, integrated into our CV3AD and the CV7 series of ASOC, can support transformer networks for a variety of generative AI applications. I would now like to describe customer engagements that can offer some indication of how this can play out.
Speaker Change: We are already in mass production with our AI products for video.
Speaker Change: Tennessee C N N networks, such as detection classification fusion planning stitching matting tracking framing auto editing and the noon hour image signal processing now.
Speaker Change: Now our third generation of AI technology integrated into our <unk> hundred 80, and the C. V. Seven series of Asos can support stressful man hours for a variety of a generative charity of AI applications.
Speaker Change: I would now like to describe customer engagements that I can offer some indication how he can play out for us.
Fermi Wang: As you know, we have made significant investment in our CV3AD family of automotive AI domain controllers, and we expect the CV3AD family to be a major revenue driver. So we are pleased to announce our first CV3AD family wins in the passenger vehicle market, which complements our ongoing wins with the CV3AD family in the commercial vehicle market. In April, during the Beijing Auto Show, we reached a strategic collaboration agreement with a battery electric vehicle company in China. This company will use our CV380 AI domain controllers in new passenger vehicle models. This is an important development for us in several respects.
Speaker Change: As you know we have made a significant investment into our <unk> family of automotive AI domain controllers, and we expect the <unk> hundred 80 family to be a major revenue drivers. So we are pleased to announce our first <unk> hundred 80 family of width in the passenger vehicle market, which complements our ongoing wins with the series 380.
Speaker Change: Family in a commercial vehicle market.
Speaker Change: In April doing the Beijing Auto show, we reached a strategic collaboration agreement with a battery electric vehicle company in China. This company will use our CV three Eva Air domain controllers in new passenger vehicle models. This is an important development for us in several regards first major by the number of an EV delivering.
Fermi Wang: First, measured by the number of EV deliveries in calendar 2023, this OEM is considered one of the top five new EV companies in China. While most of the OEM deliveries were in China last year, the company has an impressive plan for the globalization of its business. Second, Chinese automobile OEMs are aggressively and successfully adopting next-generation technology into their vehicles, which aligns with our strategy to intersect the safety and autonomy domain with next-generation technology, in particular Level 2+.
Speaker Change: Turning to our 2023. This all year is considered one of the top five new EV companies in China.
Speaker Change: While most of the OEM believers deliveries were in China last year. The company has an impressive client for a globalization of each business.
Speaker Change: Second Chinese automotive Oems Aqua aggressively and successfully adopting next generation technology into their vehicles, which aligns with our strategy to intersect the safety and economy demand with next generation technology in particular level two plus.
Fermi Wang: For example, to improve accuracy, many OEMs in China have aggressively adopted the BEV former AI framework for 3D perception tasks in its autonomous driving software stack. And this high-performance framework can leverage to a high degree the unique capability in our CV380 AI inference processors, including the ability to process transformers at low power. Third, the efficiency and the scalability of our CV3AD family portfolio are also a major factors in the collaboration with Ambarella because the OEM can reuse this software on low-, mid-, and high-NV across the board.
Speaker Change: For example to improve accuracy accuracy accuracy, many Oems in China have aggressively adopted the P. E. Former AI framework for three D perception tasks in its autonomous driving software stack and this high performance framework Calabria to high degree like the unique capability in our <unk>.
Speaker Change: <unk> hundred 80, AI inference processors, including the ability to process Transformers at low power.
Speaker Change: Third the efficiency and the scalability of our <unk> hundred <unk> family portfolio is also a major factor in our collaboration with Ambarella is the OEM to reuse the sofa and low mid and high vehicles.
Fermi Wang: In April, we added another CV380 family win in the commercial vehicle market with the announcement of a strategic collaboration with Sanyi Corporation. Sanyi is one of the world's largest engineering machinery manufacturers providing heavy-duty commercial vehicles to the global market.
Speaker Change: In April we added another <unk> hundred 80 family of wins in the commercial vehicle market with the announcement of our strategic collaboration with <unk> Corporation <unk> is one of the world's largest engineering machinery manufacturers, providing heavy duty commercial vehicles.
Speaker Change: Mobile market.
Fermi Wang: SIEE intends to leverage Ambarella's CV380 family of automotive AI domain controllers to develop advanced automated driving solutions for its next-generation commercial and special-purpose vehicles. The companies will collaborate on the joint development and promotion of high-performance and highly integrated automated driving solutions with Sanyi's goal of achieving the start of production for at least one model by calendar year 2025. At the Beijing Auto Show in April, Tier 1, the new soft reach, announced a strategic partnership with Ambarella.
Speaker Change: So I intend to leverage Ambarella is <unk> hundred 80 family of automotive AI domain controllers.
Speaker Change: Advanced automated driving solutions on its next generation commercial and a special purpose vehicles.
Speaker Change: The company the companies will collaborate on the joint development and promotion of our high performance highly integrated automated driving solutions with say its goal of achieving star.
Speaker Change: <unk> of production for at least one model by calendar year 2025.
Speaker Change: At the Beijing Auto show in April tier one.
Speaker Change: New soft the reach.
Speaker Change: Our strategic partnership with Ambarella, the company's plan to expand on their existing relationship to jointly promote and explore AI based product technology and market development.
Fermi Wang: The companies plan to expand on their existing relationship to jointly promote and explore AI-based product technology and market development in areas including autonomous driving and driver monitoring. NewSoft's third-generation forward-facing intelligent camera X-Cube 3.0 is powered by Ambarella's CV22 AI Vision SoC to target Level 2 and Level 2 Plus autonomy levels and has already been mass-produced and deployed by automotive OEMs. We are pleased to announce that SimMachine, the leading provider of driver monitoring systems software, selected our CV25 for its own aftermarket system for commercial vehicles. The Guardian Generation 3 meets the European Commission's General Safety Regulation for Droplet Detection, a requirement for all new cars, vans, trucks, and buses across Europe.
Speaker Change: Areas, including account.
Speaker Change: Tom was driving and driver monitoring.
Speaker Change: You yourselves third generation four face intelligent camera ex cube three R. O is powered by <unk> C V 22, AI vision asos.
Speaker Change: To target level, two level, two plus autonomy levels and has already been mass produced and deployed by automotive Oems.
Speaker Change: We are pleased to announce that I have seen machine the leading provider of a driver monitoring systems sulfur select our CD 25 for its own aftermarket system for commercial vehicles, Laguardia and generally a three meter European commissions general safety regulation for crossovers detection.
Speaker Change: Requirement for all the new cars vans trucks and buses across Europe.
Fermi Wang: And in April, at the ISC West Security Exhibition, we successfully demonstrated the latest generated AI technology running region language model, VRM, on our N1 and CV72 SoCs. Our demonstration included using the multi-models VLMs to search video recording to detect objects defined by text and to provide near instantaneous results without the need for training specifically for that object. This capability opens up a whole new range of AI-based search capabilities for enterprise cameras and premise-based AI systems. Our third-generation AI inference technology includes specific support needed to efficiently run these new classes of networks.
Speaker Change: And in April at the ISC West Security expansion, we successfully demonstrated our latest generation AI technologies running region language model V O N E.
Speaker Change: An hour and one and a <unk> 70 to <unk> our demonstration in cruise using the multi now those apps to search video recording to detect objects defined by packs and provide near instantaneous results without the need for training specifically for <unk>.
Speaker Change: Object.
This capability opens up a whole new range of AI based search capability for enterprise cameras, and the premise based AI systems.
Speaker Change: Our third generation AI inference technology includes specific support needed to efficiently run this new classes of networks.
Fermi Wang: During ISC West, we also announced and demonstrated our new 5 nanometer CV75 AI SoC, which provides the performance required to run the latest VRMs, as well as AI-based eye cleaning. This capability to very efficiently run these cutting-edge AI technologies is highly sought after the... sold after for cost- and power-constrained AI cameras used in enterprise, smart city, retail stores, robotics, access control, and AI-based consumer devices. After the Enterprise Connect Conference in March, Poly, a leading global provider of workplace collaboration solutions and a wholly owned unit of HP, launched its Studio E360. This center of the table system utilizes a single 5 nanometer CV5 for four 8 megapixel cameras with AI inference processing, choosing the optimal framing angle for in-room participants.
Speaker Change: During the ISC West, we also announced and demonstrated our new found nanometer <unk> 75 AI asos.
Speaker Change: Could you provide the performance required to run the latest <unk> as well as AI based IQ enhancement.
Speaker Change: This capability to very efficiently run this cutting edge AI technologies is highly sought after the call.
Speaker Change: So after forecast and the power constraint AI cameras used in enterprise Smart city retail stores robotic access control and AI base of consumer devices.
Okay.
Speaker Change: At the Enterprise connect conference in March Polycom, a leading global provider of workspace workplace collaboration solutions and wholly owned units HP launched as a studio E. $3 60. This center of the table assistant utilize a single find nanometer <unk> 5448 megapixel.
Speaker Change: Cameras was AI inference is processing choosing the optimal.
Speaker Change: Framing NGO for Angel participants.
Fermi Wang: And also in Korea, the career activity for our AI SoCs remains high, with the leading security camera maker Hanwha introducing new AI models based on our CV22 and the CV2 AI SoCs, and IDES introduced CV25-based models. And the C-PRO introduced a dual-sensor AI camera based on CV25. In the other IoT market, we are pleased to see our 5nm CV5 AI inference processor being utilized in another consumer camera to significantly improve both image quality and to automate a certain user interface function. Insta360 introduced its X4 action camera in April with dual sensors for 360-degree 8K capture.
Speaker Change: And also in Korea at the <unk>.
Speaker Change: Korea activity for our <unk> remained high with a leading security camera maker Hanwha introduce new module based on our C. V 22, and the C V to AIA, So CS and ideas introduced CV transcribe based models and <unk> introduced two sensor AI camera based on <unk> hundred two.
Speaker Change: In the other Iot market, we are pleased to see our final millimeter <unk> AI inference processor being utilized in another consumer cameras to significantly improve both image quality and to automate certain user interface functions.
Speaker Change: <unk> hundred 60 introduced X for action camera in April was still sensor for 360 degree 8-K capture.
Fermi Wang: In conclusion, as I mentioned last quarter, our goals are to restore revenue growth and profitability while continuing to drive our strategic R&D priorities. Q1 represented a step in the right direction, most significantly highlighted by our first passenger vehicle win for the CV380 family. But the expanding breadth of our CV customer engagement stands out, and we expect this to build a broad foundation on PON with multiple applications that can drive revenue growth and result in positive earnings leverage for shareholders.
Speaker Change: In conclusion, I mentioned last quarter, our goals are to restore revenue growth and profitability, while continuing to drive our strategic R&D priorities Q1 represented a step in the right direction. Most economically highlighted by our first passenger car passenger vehicle win for the <unk> hundred <unk>.
Speaker Change: <unk> family, but.
Speaker Change: By the expanding breadth, our CV customer engagements stands out and that we expect this to build a broad foundation on par with multiple applications can drive revenue growth as a result in positive earning leverage for shareholders.
Fermi Wang: The further commercialization and monetization of our technology and the product are of utmost importance to us, and I'm excited about the opportunity before us and what we will achieve in the years ahead. With that in mind, John will now discuss the Q1 results and the outlook in more detail.
Speaker Change: The further commercialization and monetization of our technology and the product is.
Upmost importance to us and I'm excited about the opportunity before us and while we will achieve in the years ahead.
With that John will now discuss the Q1 results and outlook in more detail.
John Young: Thank you, Fermi. I'll now review the financial highlights for the first quarter of fiscal year 2025, ending April 30, 2024. I will also provide a financial outlook for our second quarter of fiscal year 2025, ending July 31, 2024. I'll be 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, along with acquisition-related costs, adjusted for the impact of tax.
Speaker Change: Thank you Fermi.
John Young: I'll now review the financial highlights for the first quarter of fiscal year 2025, ending April 30th 2024, I will also provide our financial outlook for our second quarter of fiscal year 2025, ending July 31 2024.
John Young: I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results.
John Young: For non-GAAP reporting we have eliminated stock based compensation expense, along with acquisition related costs adjusted for the impact of taxes.
John Young: For fiscal Q1, revenue was $54.5 million, 1% above the midpoint of our prior guidance range, up 6% from the prior quarter, and down 12% year over year. Non-gap gross margin for fiscal Q1 was 63.4 percent, above the high end of our prior guidance range by 0.4 percent. Non-GAAP operating expense was $46.7 million, approximately $2.6 million higher than the prior quarter, and $800,000 lower than the midpoint of our prior guidance range of $46 to $49 million, driven by continued expense management and the timing of spending between quarters. We remain on track to meet our internal product development milestone.
John Young: For fiscal Q1 revenue was $54 5 million, 1% above the midpoint of our prior guidance range up 6% from the prior quarter and down 12% year over year.
John Young: non-GAAP gross margin for fiscal Q1 was 63, 4% above the high end of our prior guidance range by <unk>, 4%.
John Young: non-GAAP operating expense was $46 $7 million, approximately $2 $6 million higher than the prior quarter and $800 million.
Speaker Change: Excuse me $800000 lower than the midpoint of our prior guidance range of $46 million to $49 million.
Speaker Change: Driven by continued expense management and the timing of spending between quarters, we remain on track to our internal product development milestones.
John Young: Q1 net interest and other income was $2.3 million. Q1 non-GAAP tax provision was approximately $607,000. We reported a non-GAAP net loss of $10.5 million, or a $0.26 loss per diluted share.
Speaker Change: Q1, net interest and other income was $2 $3 million Q1, non-GAAP tax provision was approximately $607000.
Speaker Change: We reported a non-GAAP net loss of $10 5 million or a <unk> 26 loss per diluted share.
John Young: Now I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities decreased $16.6 million from the prior quarter to $203.3 million. Receivables days of sales outstanding increased from 44 days in the prior quarter to 47 days, while days of inventory decreased from 131 days to 123 days. Inventory dollars declined 2% sequentially and declined 31% from a year ago.
Speaker Change: Now I'll turn to our balance sheet and cash flow.
Speaker Change: Fiscal Q1 cash and marketable securities decreased $16 6 million from the prior <unk> million dollars from the prior quarter to $203 $3 million.
Speaker Change: Receivables days sales outstanding increased from 44 days in the prior quarter to 47 days, while days of inventory decreased from 100 from 131 days to 123 days.
Speaker Change: Inventory dollars declined 2% sequentially and declined 31% from a year ago.
John Young: Operating cash outflow was $15 million for the quarter, and capital expenders for tangible and intangible assets were $1.1 million. We had two logistics and ODM companies representing 10% or more of our revenue in Q1. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 62% of revenue for the first quarter. Ciccone, an ODM who manufactures for multiple end customers, came in at 13% of revenue for the quarter.
Speaker Change: Operating cash outflow was $15 million for the quarter.
Speaker Change: Capital expenditures for tangible and intangible assets for $1 1 million.
Speaker Change: We had two logistics and ODM companies, representing 10% or more of our revenue in Q1 <unk>.
Speaker Change: WT microelectronics, a fulfillment partner in Taiwan that shifts to multiple customers in Asia came in at 62% of revenue for the first quarter.
Speaker Change: Kony, an ODM, who manufactures for multiple end customers was 13% of revenue for the quarter.
John Young: I'll now discuss the outlook for the second quarter of fiscal year 2025. We remain confident our business is continuing to recover from the cyclical correction, led by our AI inference product. For fiscal Q2, we estimate our total revenue will be in the range of $60 to $64 million. We expect sequential growth in both IOT and auto. We expect fiscal Q2 non-GAAP gross margin to be in the range of 62.5% to 64%.
Speaker Change: I'll now discuss the outlook for the second quarter of fiscal year 2025, we.
Speaker Change: We remain confident our business is continuing to recover from the cyclical correction.
Speaker Change: Led by our AI inference products.
Speaker Change: For fiscal Q2, we estimate our total revenue will be in the range of $60 million to $64 million, we expect sequential growth in both Iot and auto.
Speaker Change: We expect fiscal Q2, non-GAAP gross margin to be in the range of 62, 5% to 64%.
John Young: We expect non-GAAP OPEX in the second quarter to be in the range of $47.5 to $49.5 million, with the increase compared to Q1 driven by increased headcount and engineering-related expenses, including our first 2-nanometer SOC project. We estimate net interest income to be approximately $1.8 million, our non-GAAP tax expense to be approximately $600,000, and our diluted share count to be approximately 41.1 million shares.
We expect non-GAAP opex in the second quarter to be in the range of 47, five to 49 and a half million dollars with the increase compared to Q1, driven by increased head count and engineering related expense, including our first two nanometer Soc project.
Speaker Change: We estimate net interest income to be approximately $1 $8 million, our non-GAAP tax expense to be approximately $600000.
Speaker Change: And our diluted share count to be approximately $41 1 million shares.
John Young: Ambarella will be participating in Bank of America's Global Technology Conference on Wednesday, June 5th, in San Francisco, Mizuho's Technology Conference on June 12th, in New York City, and Rosenblatt's Virtual Age of AI conference on June 13. We hope to see you at one of these events. Please contact us for more details. Thank you for joining our call today, and with that, I will turn the call over to the operator for questions.
Speaker Change: Ambarella will be participating in bank of Americas Global Technology Conference on Wednesday June 5th in San Francisco Mizuho Technology Conference on June 12 in New York City.
Speaker Change: And Rosenblatts virtual age of AI conference on June 13th.
Speaker Change: We hope to see you at one of these events please contact us for more details.
Speaker Change: Thank you for joining our call today and with that I will turn the call over to the operator for questions.
Operator: Certainly. One moment, ladies and gentlemen, for the first question. And as a reminder, if you do have a question at this time, please press star 1-1. And our first question for today comes from the line, Christopher Rolland from Sheshquahana. Your question, please.
Speaker Change: Certainly one moment, ladies and gentlemen for the first question and as a reminder, if you do have a question at this time. Please press star one one.
Speaker Change: And our first question for today comes from the line.
Speaker Change: Christopher Rolland from Susquehanna Your question. Please.
Christopher Adam Jackson Rolland: Hey guys, can you hear me? Great. Thanks for the question. You brought up VLMs on the call. Just wanted to know a little bit more about that application. Does that increase your TAM overall? Is this additive to what you're doing in, for example, LLMs? How should we think about that?
Speaker Change: Hey, guys can you hear me.
Yes.
Speaker Change: Great. Thanks for the question.
Speaker Change: You brought up VL analysts on the call.
Speaker Change: Just wanted to know a little bit more about that application does that increase your Tam overall.
Speaker Change: Is this additive to what Youre doing in for example, L O labs.
Speaker Change: How should we think about that thanks.
Fermi Wang: Right, so, you know, we started talking about LLM and started demoing at CES this year. And then we continued to watch the potential applications that we can use with our solution for our customers. And we identified the vision language model, which is really, you know, a large language model that can respond to text, or search different objects, or use that to describe different video things. And we have a live demo.
Speaker Change: Right.
Speaker Change: We start talking about <unk>.
Speaker Change: And start them, we got CES this year.
Speaker Change: We continue to watch the potential application that we can use with our solution for our customers and we identify vision language model, which is really you know.
Speaker Change: Largely language model that can <unk>.
Speaker Change: Respond to tax for search different objects or using that to describe different.
Speaker Change: Video things and we have a lifetime or in fact, well counsel you to give us two co lo as a setup lifetime or for you how the vision I would that would you.
Fermi Wang: In fact, we welcome you to call, Louis, to set up a live demo for you of the vision language model used with our current enterprise customers or other potential customers in that space. So this definitely is a brand new application that is being identified by the market and the customers, and we're engaging with our current customers, particularly in the enterprise and security camera market. And they show great interest in this product because you can imagine that this is really a model that can replace the people who use to monitor the different cameras in a control center.
Speaker Change: <unk> used in our with our current enterprise customer or other potential customer in that space. So this definitely is a brand new application that we identified by the by the market and our customer and we're engaging with our current customers, particularly on the <unk>.
Speaker Change: Enterprise security.
Speaker Change: Security camera market and they showed extremely interest on this product because you can imagine that that this is really.
Speaker Change: Model that can replace the.
Speaker Change: People, who used to monitor the different cameras in our control center and you can use a light lodge that remodel not give you early morning, but also have are using pack to a search of different objects without really training photos objects and I think thats, a really a breakthrough for enterprise site and we expect that some of our costs.
Fermi Wang: And you can use a large language model not just to give you an early warning but also to use text to do a search of different objects without really training for those objects. And I think that's really a breakthrough for the enterprise side. And we expect that some of our customers will kick off projects with us, using VRMs, in the near future. And we can use both N1 as well as CV72 for that product.
Speaker Change: Well kick off projects with us with <unk>.
Speaker Change: <unk> in the near future and we can use both N one as well as <unk> 72.
Fermi Wang: Great, thanks for me. And then on the auto opportunity, you know, making some progress here sounds like on the Chinese EV side of things. Perhaps you can talk about the pipeline, kind of how you see it expanding, engagement, of late here that you're seeing, and whether you think there's going to be more to come and whether any of these could actually be implementing your software, as well. Thanks. Right. So, first of all, I definitely believe there will be more.
Speaker Change: For that product.
Speaker Change: Great. Thanks for me and then on the auto opportunity.
Speaker Change: Making some progress here sounds like.
Speaker Change: On the Chinese EV side of things.
Speaker Change: Perhaps you can talk about the pipeline kind of how you see expanding engagements.
Speaker Change: Of late here.
Speaker Change: That you are seeing.
Speaker Change: And and.
Speaker Change: And whether you think there's going to be more to come and whether any of these could actually be implementing your software.
Speaker Change: As well thanks.
Speaker Change: So first of all I definitely believe there will be more to come.
Fermi Wang: And I also believe that the first design wing is really going to show off that, you know, our – what we have been talking about, our strengths, which is that we can run really transformer-based most advanced networks very efficiently, low power, and also have a scalable architecture that can really address using a sensor to address from low-end to high-end vehicles. And also, that the power consumption that we are much lower than our competitors gives us significant advantages in the design wing. So that really is the reason we won. But also, I think it's important to point out that it's just like an EV market. Chinese EV automakers are really aggressive by pushing the technology envelope.
Speaker Change: And I also believe that.
Speaker Change: The first design win is reach of that.
Speaker Change: Our quite we have been talking about our strengths, which is we can run really transform our most advanced network very efficiently and local power and also we have a scalable architecture that can really address using a sense over to address four low end to the high end vehicles and also that the pulp the power consumption.
Speaker Change: That were much lower than our competitors gave a cyclic siegfried pound advantages.
Speaker Change: The design wins, so that really is reason we won but also I think is important to pointed out that is just like the EV market Chinese EV or <unk>.
Speaker Change: Automakers are really aggressive put by pushing technology envelope and that for a while then adapting our level two plus solution is.
Speaker Change: Help us for other potential OEM design win that we're bidding on.
Fermi Wang: Thanks for me.
Speaker Change: Pardon me.
Ethan Potashnik: Thank you. One moment for our next question, and our next question comes from the line of Ethan Potashnik from TD Cowan. Your question, please.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Ethan Protection from TD Cowen Your question. Please.
Ethan Potashnik: Yeah, hi, everybody. This is Ethan Potasmigon on behalf of Matt Ramsay.
Ethan: Yes, hi, everybody. This is Ethan <unk> on for Matt Ramsey Congrats on the great results.
John Young: Congratulations on the great results. I wanted to ask, is the passenger vehicle, which you guys discussed tonight, likely to get a CV3 to the tipping point with regard to wins at other OEMs, you know? And are there other OEMs waiting to see maybe another one kind of go first? Maybe if you guys could discuss those dynamics.
Ethan: I wanted to ask.
Ethan: Is the passenger vehicle when you guys discussed tonight are likely to get.
Ethan: <unk> III to the tipping point with regards to.
Ethan: Wins at other Oems.
Ethan: Are there.
Ethan: And are there other Oems waiting to see maybe another one.
Speaker Change: Gulf first maybe if you guys could discuss.
Speaker Change: Those dynamics.
Fermi Wang: Right. So, first of all, I think the lifetime value of this design wing is meaningful and also material for us, and also that they are very aggressive. The target NP date is the end of 2025, early 2026, and that will help us to really take our CV3 AD platform into production, and therefore provide a mature solution to other companies who are considering our current solution. So I definitely believe that not only this design wing is a help to our pipeline, but it is also going to be a major help for us to secure other design wings in the near future.
Speaker Change: So first of all I think the other.
Speaker Change: The lifetime value of this design win is meaningful and also material for us and also that they are very aggressive that target.
Speaker Change: <unk> data at the end of 'twenty five early 'twenty, six and that will help us to really take our <unk> platform into production. Therefore provide a mature solution to other companies who is considering our current solutions.
Speaker Change: Definitely believe that not only this design win is help to our pipeline, but also going to be a major health laws to secure design wins in the near future.
Fermi Wang: Okay, understood. And as my follow-up, you guys gave a lot of good information around the AI inference opportunity and what the revenue is expected to kind of grow 30%. I think you guys said in fiscal 25. And you called out some progress; I think it was the enterprise application. I was wondering, you know, how the early stages of this opportunity are playing out, what sort of impact some of the announcements you guys made at CES, I think it was the N1 SoC and the Cooper Development Platform, or, you know, what's kind of driving that? How is the roadmap progressing? Any additional insight would be helpful.
Speaker Change: Okay understood.
Speaker Change: And as my follow up you guys gave it.
Speaker Change: Lot of good information around the AI inference opportunity with revenue.
Speaker Change: All expected to kind of grow 30% I think you guys said in fiscal 'twenty five.
Speaker Change: And you called out some some progress I think it was in.
Speaker Change: Enterprise applications.
Speaker Change: I was wondering you know how these how the early stages.
Speaker Change: Of this opportunity is playing out what sort of impact.
Speaker Change: Some of the announcements you guys made at CES I think it was the end one SLC and the Cooper development platform.
Speaker Change: What's what's kind of driving that.
Speaker Change: Does the roadmap progressing any early feedback.
Speaker Change: Any additional insight would be helpful.
Fermi Wang: Right, so just to maybe refresh our Gen-AI strategy, we definitely intend to leverage our current existing third-generation AI inference engine into a Gen-AI and LLM. And we demoed, like you said, CS-N1 with the LAVA demo, and then at the ICWES, we demoed VLM running on both N1 and CV7.
Fermi Wang: Right, so just a remark...
Speaker Change: Correct. So just.
Speaker Change: Maybe refresh our AI strategy definitely intend to leverage our current existing origination AI inference engine into our <unk> and <unk>.
Speaker Change: And we demo the psychosis CES unwound with lava demo and then.
Speaker Change: Our Ics we demo with.
Speaker Change: VRM out running on both the NYSE <unk> seven so our strategy for current generation has become very clear first of all we're going to focus on H application. Both were each camera Oswald H servers to will focus on the workload that we can really can take advantage of our current silicon and so.
Fermi Wang: So our strategy for the current generation has become very clear. First of all, we're going to focus on each application, both for each camera as well as each server. Two, we'll focus on the workload that we can really take advantage of our current silicon. And so that's really the enterprise market as well as some adjacent markets that can use those LAVA models as well as VLM models. And we think, we continue to believe that our opportunity for Gen-AI revenues in 2026 is not only demoing, but we're sampling N1 and the CV72 to our key customers who are interested in Gen-AI applications. So that's our first generation.
Speaker Change: Really enterprise.
Speaker Change: Market as well as some adjacent markets that can use loza of lava model as well.
Speaker Change: <unk> models, and we think we continue to believe that.
Speaker Change: Our opportunity for.
Speaker Change: Jen AI revenues in 2026, we are not only downloading was simply inks and why and the <unk> 72 to our key customers who are interested in Shanghai application.
Fermi Wang: And also, as you can see, John mentioned that we're investing in a 2-nanometer processing node. You can think of that as preparation for our next generation GNI solution. Although we haven't talked about our plan for that yet, we are trying to work on that. But we believe that our 2-nanometer technology development will significantly help us on the technology side for our room.
Speaker Change: That's our first generation and also as you can see I think John mentioned that we're investing on two nanometer process node you can think of that as a preparation for our next generation Shanghai solution. Although we didn't talk about our plan for that yet we are trying to work on that but we believe that with our second nano two nanometer.
Speaker Change: Technology development, we are cyclically significantly helped us on the technology side for our roadmap.
Joseph Lawrence Moore: Thank you. One moment for our next question, and our next question comes from the line of Joe Moore from Morgan Stanley. Your question, please.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
And our next question comes from the line of Joe Moore from Morgan Stanley. Your question. Please.
Fermi Wang: Great, thank you. In terms of the passenger car win in China, can you talk about, I think you mentioned it as an L2+, if I heard you right, type of opportunity. Can you describe how many cameras per car and what capabilities you could offer there?
Speaker Change: Yes.
Speaker Change: Great. Thank you.
Joseph Lawrence Moore: In terms of it.
Passenger car win in China.
Speaker Change: Can you talk about I think you mentioned it is a <unk> plus if I heard you right type of opportunity Keith you kind of describe how many cameras per car and what capabilities you could offer there yes.
Fermi Wang: Yes, so first of all, it is an L2 plus car, and because they have different models, it's anywhere from 7 to 10, 7 to 10 cameras plus five radars, and it's designed to do it from the highway level to city levels of autonomous driving.
Speaker Change: Yes, so first of all it is a <unk> plus.
Speaker Change: Car and because they have different models is anywhere from seven to 10 seven to 10 cameras classified radars configuration and.
Speaker Change: It's.
Speaker Change: It's designed to do.
Speaker Change: It followed a highway level to CD levels autonomous driving.
Fermi Wang: Great, thank you for that. And then was this customer? I know you have a probability-weighted funnel. Was this customer somebody that you had anticipated had some probability within that funnel? Yes.
Speaker Change: Great. Thank you for that and then was this customer I know you have a probability weighted funnel.
Speaker Change: Was this customer somebody that you had anticipated had some profitability within that funnel.
Fermi Wang: Yes, and now I think with the next final discussion they should be in one category instead of the probability category.
Speaker Change: And now I think with the funnel.
Speaker Change: Final discussion they should be in the one category set of probability category.
Speaker Change: Perfect. Thank you so much.
Speaker Change: Yes.
Fermi Wang: Thank you. One moment for our next question, and our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your question, please.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your question. Please.
Kevin Edward Cassidy: Thanks, and congratulations on the great results and the design win momentum. And maybe Fermi, maybe you hinted, I was going to ask more questions about the two nanometer process technology. Do you have a timeline for when you'd have first silicon? And are you staying with Samsung? Or will this be with DSMC?
Kevin Edward Cassidy: Thanks, and congratulations on the great results and the design win momentum.
Speaker Change: And maybe Fermi, maybe you hinted I was going to ask more questions about the two nanometer process technology.
Speaker Change: If you have a timeline for when you'd have first silicon or and are you staying with Samsung.
Speaker Change: Speed with TSMC right. So.
Fermi Wang: Right. This 2-nanometer will be a sensor 2-nanometer, and we plan to tape our second half next year and get ready to go into production in 2026.
Speaker Change: This two nanometer will be central to nanometer and we plan to tape out second half of next year and get ready to go into production with 2026.
Kevin Edward Cassidy: Okay, great. And maybe just to follow up on Joe's question, you mentioned that it's seven to ten cameras plus radar. Is that your radar in the design?
Speaker Change: Okay great.
Speaker Change: Maybe just a follow up on Joe's question.
Speaker Change: You mentioned that it's seven to 10 cameras plus radar is that your radar and the design.
Fermi Wang: We haven't talked about that yet.
Speaker Change: Yeah.
Speaker Change: We haven't talked about that yet.
Fermi Wang: Okay. All right. Maybe I'll go to an easier question. Your backlog visibility, you know, if you're saying you're going to see growth in fiscal year 2025, can you talk about your backlog visibility? Yes.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Maybe I'll go to an easier question would just.
Speaker Change: Your backlog visibility.
Speaker Change: Youre, saying youre going to see growth in 'twenty fiscal year 2025.
Speaker Change: Can you talk about your backlog visibility.
Fermi Wang: Yes. Our backlog visibility is getting much better than before. In fact, that's the reason we feel comfortable with the street's consensus of $250 million revenue forecast this year. And we, you know, our lead time is really in the 24 weeks, and the badge tells us that we should have clear visibility to the middle of Q4, reminding you that our Q4 goes to January. So we see clear booking for Q3 and Q4. That's why we continue to feel comfortable with our guidance.
Speaker Change: Yes.
Speaker Change: Our backlog visibility getting much better than before in fact, that's the reason we feel comfortable that.
Speaker Change: With the street's consensus of $250 million revenue forecast this year and.
Speaker Change: With our lead times are really in the 24 weeks and the Dash 10.
Speaker Change: Tell us that we should have a clear visibility to middle of Q4.
Speaker Change: Now that our Q4 two January so.
Speaker Change: We see clear booking for Q3 and Q4, that's why we continue to feel comfortable with our guidance.
Fermi Wang: Okay, great. Thank you. However, let me...
Speaker Change: Okay, great. Thank you.
Fermi Wang: However, let me add one more sentence. I think that while we are comfortable with the $250 million consensus level, we believe there is seasonality in Q4. So I think that's something we should consider. While we see the visibility, we definitely believe that we're going to continue to see the trend of Q2 to Q3 growth, but from Q3 to Q4, just like the normal seasonality before COVID, we should have seasonality in Okay, understood.
Speaker Change: However, let me add one more centers I think that weak while we are comfortable with the $250 million of consensus level. We believe there is a seasonality in Q4, so I think that something we should consider.
Speaker Change: While the while we see the visibility, but we definitely believe that we can continue the trend of Q2 to Q3 growth Q3, Q4, just like at the normal seasonality before the Covid.
Speaker Change: We should have.
Speaker Change: Seasonality in there.
Speaker Change: Yes.
Speaker Change: Okay understood.
Fermi Wang: Thank you. One moment for our next question. [inaudible] And our next question comes from the line of Quinn Bolton from Needham & Company. Your question, please.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question.
Speaker Change: Comes from the line of Quinn Bolton from Needham <unk> Company. Your question. Please.
Nick Doyle: Hey, this is Nick Doyle. I'm for Quinn.
Nick: Hi, This is Nick <unk> on for Colin and thanks for taking our questions maybe.
Nick Doyle: Thanks for taking our questions. Maybe just zooming out a little bit, could you give us a pulse on the Chinese auto market overall? How do you see current EV demand and supply? And then you mentioned two CV3 wins in the passenger and commercial markets. Can you size those opportunities at all?
Speaker Change: Maybe just.
Speaker Change: Zooming out a little bit could you give us a pulse on the Chinese auto market overall, how do you see current EV demand and supply and then you mentioned to CV surgery.
Speaker Change: Wins in the passenger and commercial markets can you size those opportunities at all thanks.
Fermi Wang: Right. So, first of all, we don't play in the EV market; we play in the autonomous driving market, but they are very much correlated. I think what happened in EV is that Chinese automakers continue to aggressively push the technology envelope on the EV side. We see the same trend on the autonomous driving technology side. I think, for example, that, you know, almost all the RPQ that we're bidding on in China, all of them require, you know, most events networks like BEV former, very L2 plus, you know, C-level autonomous.
Speaker Change: Right. So first of all we don't play on the EV market will play on the autonomous driving market, but they are very very much correlated I think what happened with <unk> is that Chinese automaker continue to aggressively push the technology envelope.
Speaker Change: The EV side.
Speaker Change: We see the central.
Speaker Change: Tom driving technology side, I think for example that.
Speaker Change: Almost all the <unk> that we're bidding in China all of them require most events that will collect BV former very <unk> plus LLC level come autonomous all of that is really.
Fermi Wang: All of that is really showing me that they are very aggressive; Chinese automakers are very aggressive in pushing the technology envelope. And we believe that's a strength, and we believe that we can take advantage of that. Although the EV market shows some slowness in terms of total market size, but I think that from the AD market point of view, we still believe that the growth will continue to be there, and we expect that the majority of EV cars will have a level two, level two plus system in the coming years, near term.
Speaker Change: Showing me that they are very aggressive Chinese automaker, a very aggressive to pushing the technology envelope and we believe that play to our strengths and we believe that we can take advantage of that.
Speaker Change: Although that EV market show some slowness.
Speaker Change: In terms of the total market size, but I think that.
Speaker Change: The ADC market point of view, we still believe that the growth has continued to be there and we expect that majority of the EV cars will have a level two level two plus systems in the coming years near near term.
John Young: Okay, the margins, the gross margins were a bit of a bright spot in the quarter-end guide. Could you expand on what's driving that? Yeah, so essentially, it's a mix.
Speaker Change: Okay.
Speaker Change: Margins the gross margins were a bit of a bright spot in the quarter and guide could you expand on what's driving that.
John Young: Yeah, so essentially, it's mix. We had a little bit higher contribution than we had forecast for customer NRE projects that came through in the quarter. That's the main driver.
Yes, so essentially it's mix.
Speaker Change: We had a little bit higher contribution than we had forecast for cut.
Speaker Change: Customer NRA projects that came through in the quarter the main driver.
Jeremy Lobyen Kwan: Thank you. One moment for our next question. And our next question comes in on the line, Tore Svanberg from Stifo. Your question, please.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Toy Steinberg from Stifel. Your question. Please.
Jeremy Lobyen Kwan: Yes, this is Jeremy calling for Tori. And let me add my congratulations on the growing number of CB3 design wins. Maybe a quick follow-up on the gross margin and NREs. Is the NRE something that is kind of like an ongoing project that is sustainable in terms of, you know, contribution over the longer term? Just want to see the impact, I guess, on you, of gross margins over the next 12 to 18 months. But yeah, that's my first question.
Speaker Change: Yeah.
Jeremy: Yes. This is Jeremy calling for Tory and let me add my congrats on the.
Speaker Change #100: It'd be great design win maybe.
Speaker Change #101: Maybe a quick follow up on that gross margin and <unk>.
Is that something that is kind of like an ongoing project that are global in terms of.
Speaker Change #101: Contribution over the longer term.
Speaker Change #101: Wanted to see the impact I guess your gross margins.
Speaker Change #101: Now 12 18 months.
Speaker Change #101: Great.
Speaker Change #102: First question.
John Young: So, yes, it is a project that will be ongoing in the near future. Our long-term model, though, is 59 to 62 for gross margins. I think, you know, there may be a temporary blip-up for this quarter, next quarter, potentially, as we've guided. But I think, if you're thinking about long-term modeling, I wouldn't see this as a new norm, necessarily.
Okay.
Speaker Change #103: So yes, we did.
Speaker Change #103: Project that will be ongoing.
Speaker Change #103: In the near future.
Speaker Change #103: Our long term model, though is 59 to 62 for gross margins.
There may be a temporary.
Speaker Change #103: Temporary blip up.
Speaker Change #103: For this quarter next quarter potentially as we've guided.
Speaker Change #103: But I think if you're thinking about long term modeling.
Speaker Change #103: I wouldn't I wouldn't see this as a new norm necessarily.
Jeremy Lobyen Kwan: Got it. And I guess in terms of this passenger vehicle design win, can you give us a little bit more detail in terms of, like, how many car models are impacted? If there's a way to kind of weight it in terms of how many of the new vehicles are likely to see this incorporated? And also, I understand the ESPs, even an L2 plus can have a pretty wide range, you know, maybe 40 at the low end, 200 at the higher end. Can you give us a ballpark, you know, where this sits in terms of the design win on the ESP side? Thank you.
Speaker Change #104: Got it and I guess in terms of the.
Speaker Change #105: Passenger vehicle design win can you give us a little bit more detail in terms of like how many.
Speaker Change #106: Car models are impacted.
Speaker Change #105: Yes.
As a way to kind of wait it in terms of how many of their new vehicles are likely to incorporate it.
Speaker Change #107: I understand.
Speaker Change #108: The ESP even in <unk> Park.
Speaker Change #109: Pretty wide range.
Speaker Change #109: Maybe 40 at the low end to end at the higher end.
Speaker Change #110: Can you give us a ballpark.
And in terms of the design win.
Fermi Wang: Right, so first of all, this, you know... Currently, this OEM has only a portion of the model has level 2 plus in there. But I do believe, just like any other Chinese OEM we talk to, they want to move to a level 2 plus for all their models because they view that as a huge differentiation. So I think we expect when we go into production with this customer, all of the cars they ship will have some kind of level 2 plus solution there.
Speaker Change #111: Thank you.
Speaker Change #112: Right. So first of all.
Speaker Change #112: No.
Speaker Change #112: Currently this current this OEM has all year.
Speaker Change #112: A portion of the motto has a level two plus in there, but I have to believe just like any other Chinese OEM, we talk to.
Speaker Change #112: They want to move to.
Speaker Change #112: Level, two plus two OLED models, because they view that as a huge differentiation. So I think that we expect when we go into production with this customer.
Speaker Change #112: All of the car they ship it will have.
Speaker Change #112: Some kind of level two plus solution there.
Fermi Wang: As we talked about in the past, in our low end to high end ship, it can go anywhere from $50 to $400, and the midpoint is $100 plus to $200. That's the range we're looking at from an ASP point of view. And we'll start addressing more; we can disclose more with our customer. In terms of the size of this true opportunity, I really think that it's, you know, we talked about this significantly.
Speaker Change #112: Talk about in the past in our low end to high end chip.
Speaker Change #112: Go anywhere from $50 to $400 and the midpoint is 100 plus $200. That's the range. We're looking at from an ASP point of view and we are a style dressing.
Speaker Change #112: More.
Speaker Change #113: Well, we have we can disclose more with our customer in terms of the size of this opportunity.
Speaker Change #113: I really think that the.
Speaker Change #113: We've heard lots of significant I think.
Fermi Wang: I think it's... It's worth $100 million easily for the first design win, but we think that we can achieve more if we can continue to work with our customer, get more models and more other components into their car.
Speaker Change #114: Is it.
Speaker Change #114: Those $100 million easily for one the first design win but we think of that that we can achieve more if we can continue to work with our customer get more models and more other components into the car.
Fermi Wang: Thank you, Fermi. I'm sorry; I didn't quite catch how many millions it was for the first design win.
Speaker Change #115: Thank you Jeremy.
Speaker Change #116: Didn't quite catch.
Speaker Change #117: How many known with with personnel bandwidth.
Fermi Wang: I say no to $100 million. Low to 100.
Speaker Change #118: As a note of $100 million.
Speaker Change #119: Load at a $100 million.
Fermi Wang: Noor. Norris, I got it. Thank you.
Speaker Change #118: North.
Speaker Change #120: Got it thank you.
Operator: Thank you. One moment for our next question, and our next question comes from the line of David O'Connor from BNP Paribas. Your question, please.
Speaker Change #121: Thank you one moment for our next question.
Speaker Change #122: And our next question comes from the line of David O'connor from BNP Paribas. Your question. Please.
David O'Connor: Great, thanks for taking my question, guys. Maybe just going back to the seasonality in Q4, just looking back there, pre-COVID, as we talked about, seemed to be down like 15-20% Q&Q. Is that kind of the type of ballpark or zip code we should be thinking of for that Q4 seasonality? Or is it a bit more muted than that, given the secular trend that you're seeing? That's my first
David O'Connor: Great. Thanks for taking my question guys maybe.
David O'Connor: Maybe just going back to the seasonality in Q4, just looking back their pre COVID-19 as we talk to both seem to be down like 15%, 20% Q on Q is that kind of the type of ballpark or ZIP code, we should be thinking up for the Q4 seasonality or is that more users than that given the secular.
Speaker Change #124: But youre seeing Thats my first question.
John Young: Yeah, so, you know, I think it's relatively difficult for us to give you, you know, crisp visibility out into Q4, but I think, you know, if you're thinking about the full year guidance of, you know, or I should say the consensus of $250 million, I think that's definitely reasonable at this point. We don't have any issue with that. I think, though, the number of the percentages you're talking about is, you know, within reason.
Speaker Change #125: Yes so.
Speaker Change #126: I think it's relatively difficult for us to.
Speaker Change #126: Give.
Speaker Change #126: Crisp visibility out into Q4, but I think if youre thinking about the full year guidance of.
Speaker Change #126: I should say the consensus of $250 million I think thats definitely reasonable at this point.
Speaker Change #126: <unk>.
Speaker Change #126: We don't.
Speaker Change #127: I don't have any issue with that.
Speaker Change #127: I think though.
Speaker Change #127: The number of the percentages you are talking about are within reason.
Fermi Wang: You know, we have seen this kind of seasonality before COVID time. And I think right now, after COVID is done, after all the inventory correction is done, I think we're back to normal seasonality. And with the downturn, we're having probiotic guidance in Q4, but I think if you look at the past history, that will probably be probably – if you look at the past, it will be similar to the seasonality we've seen before. The majority of that is on the IoT side, but a little bit on the auto side.
Speaker Change #127: No.
Speaker Change #127: Seeing this kind of seasonality before Covid time, and I think we ran our after the covanta. After the all the inventory crushing has done well I think we're back to the normal seasonality and.
But with our critical with the downturn, we haven't provided guidance for Q4, but I think if you look at our past history that we can probably if you look at the pattern will be similar to the.
Speaker Change #127: The seasonality we've seen before majority of that is in the endo in the Iot side, but a little bit on the auto side.
David O'Connor: Okay, I got it. That's helpful. Thanks, guys.
Speaker Change #128: Okay got it that's helpful. Thanks, guys and then maybe just a follow on on the.
Speaker Change #129: On the <unk> win with the EV passenger vehicle.
Fermi Wang: And then maybe just to follow on the CV3 win with the EV passenger vehicle. Just to clarify, I mean, this is separate from the Conti-Bosch agreement. Did it have anything to do with that? And can you update us as well on the status of those agreements, where they stand at the moment? Thank you.
Speaker Change #130: Just to clarify I mean this is separate to the current <unk> Bosch agreement does it have anything to do with US and can you update us as well just on the status of those agreements where they stand at the moment.
Fermi Wang: Yes, first of all, this design has nothing to do with the country of Bosch. This Chinese guy is really using a Chinese supply chain.
Speaker Change #129: Yes.
Speaker Change #131: Of all <unk> has nothing to do with accounting abolish this Chinese guys.
Speaker Change #131: Using a Chinese supply chain.
Fermi Wang: And in terms of accounting, I would say that we continue to have very strong collaboration both on the ASOC and the SOFR side. And also, we continue to make progress moving toward our first ASOP project that we talked about probably a year ago. And that target NP time is kind of the year 27. We continue to make great progress on that. And also, we actively build on the RFI, RFQs. So with the Bosch site, also, we don't have a software development collaboration, but we do have working with them on the RFI, RFQs, bidding on some of the European designs.
Speaker Change #131: <unk>.
Speaker Change #132: In terms of accounting I will say that we continue to have very strong collaboration and posted on the <unk> and the software side and also we continue to make good progress moving towards our first ACP project that we talk about probably a year ago end of that target <unk>.
Speaker Change #132: The 27 will continue to make great progress on that and also we actively building.
Speaker Change #132: Bidding on the <unk>.
Speaker Change #132: <unk> was county, others, so with a pulse sites also have software development collaborations, but we do have.
Working with them on the resi off Qs, beating on some of the European design wins.
David O'Connor: Great, that's helpful. Thanks, guys....
Speaker Change #133: Great. That's helpful. Thanks, guys.
Richard Cutts Shannon: Thank you. Thank you. One moment for our next question, and our next question comes from the line of Richard Shannon from Crick-Hellam Capital. Your question, please.
Speaker Change #134: Thank you. Thank you one moment for our next question.
Speaker Change #135: And our next question comes from the line of Richard Shannon from Craig Hallum Capital. Your question. Please.
Richard Cutts Shannon: Well, hi guys. Thanks for taking the time to answer my questions. Maybe touching on your comments about AI inference growing 30% or more this year, maybe give us a sense here of how much this is weighted towards IoT versus automotive, and then any kind of general sense here of how much this unit versus ASP-driven. And then it seems like you do the basic math using the fiscal 25% consensus. It seems like AI will probably get a little over 70% of sales this year. Is that decent math on that?
Speaker Change #136: Hi, guys. Thanks for taking my questions.
Richard Shannon: Maybe touching on your comments about AI and Prince growing 30% or more of this year, maybe give us a sense here of how much. This is weighted towards Iot versus automotive and then any kind of general sense of your unit versus ASP, driven and then it seems like you do the basic math using the fiscal 25 consensus it seems like AI would probably get a little over 70%.
Sales of shares that are decent.
Richard Shannon: Decent math on that.
Fermi Wang: I think your math is correct. Let me give you more color.
Speaker Change #138: I think your math is correct and let me give you more color I think first of all our we have a lot of design wins on the <unk> five and <unk> 72, as particularly <unk>, we talked about that the production getting into production. This year and we would hope that we're going to ship 1 million users of <unk>. This year and consider the ASP is.
Fermi Wang: I think, first of all, we have a lot of design wins on the CV5 and CV72. In particular, CV5, we talked about getting into production this year. And we talked about that we're going to ship 1 million units of CV5 this year. And consider that the ASP is around $35, plus or minus.
Around $35, plus minus and that really help us to look at it.
Fermi Wang: And that really helped us to get an ASP jump as well as revenue growth. So that's one side of CV growth. The other side of CV growth is that we believe CV72, well, getting into production was an enterprise IoT. And that's another one.
Speaker Change #139: ASP Jamba.
Speaker Change #139: As well as revenue growth. So that's one side of our CV growth. The other such ICD growth is that we believe <unk> 72, we are getting to production with the enterprise Iot and Thats. Another one and but also by however, I also want to point out that even in automotive. We continue to ship for example, we just announced a design win with.
Fermi Wang: But also, however, I also want to point out that even in the automotive industry, we continue to ship. For example, we just announced a design win with Newsoft on the ADAS side with CV22, and as well as a few other design wins we had with automotive. So I think both IoT and the auto industry will continue to have CV growth in there, but I think IoT is probably more.
Speaker Change #139: With new soft on the Adas side was <unk> 22, and as well as a few other design win we had with the automotive so I think both Iot and auto well continue to have a CV growth in there, but I think Iot is probably more.
Richard Cutts Shannon: Okay, perfect. That's helpful, Jeremy.
Speaker Change #140: Okay perfect that's helpful Fair Ma'am.
Richard Cutts Shannon: A follow-up question here on a different topic, and that of kind of China-U.S. geopolitics here, obviously in the context of a couple of nice wins here with their CB-3AD domain controller going into China. I'm just wondering if there's any change in the kind of undercurrent of geopolitics that might make it a little bit more of a headwind to continue to do well there. Just want to get a general sense here if there's been any real change.
Speaker Change #141: Quick question here on a different topic.
Speaker Change #142: China U S. Geopolitics here, obviously in the context of a cup.
Speaker Change #143: A nice wins here with UCB create domain.
Speaker Change #144: Going into China I was just wondering if there's any change in the kind of the undercurrent.
Speaker Change #144: Geopolitics that might make it a little bit more of a headwind to continue to do well there just wanted to get a general sense or if there's been any real change there.
Fermi Wang: No, I don't think there's been any meaningful change in the last three months. I think the geopolitical situation continues to be an issue that we need to watch and deal with. I think that we talk about that, you know, the Chinese market; Chinese customers really want to make sure they use some local components, but, however, I think with the advantage we have, especially for customers who are focusing on the export business, they also need to use silicon from outside China. So I think that's kind of the balanced view we have right now, and that hasn't changed. We haven't seen any new regulations for any regulation to change these AI limitations.
Speaker Change #145: I don't think Theres any meaningful change in the last three months I think geopolitical situation continue to be an issue that we need to watch them and to deal with.
Speaker Change #145: I think that we talk about that.
Speaker Change #145: Chinese market.
Speaker Change #145: Chinese customer.
Speaker Change #145: What we really want to make sure they use.
Speaker Change #145: Local component, but however, I think we sort of vintage we have pay especially for customers who are focusing on the export business.
Speaker Change #145: Also need to use.
Speaker Change #145: Silicon from outside China. So I think that's kind of a balanced view, we have right now and that that hasnt changed.
Richard Cutts Shannon: Okay. Perfect. Great. Thank you, Fermi.
Speaker Change #145: We haven't seen any new regulation from a regulation to change this AI limitations.
Speaker Change #146: Okay perfect great. Thank you Fermi.
Kevin Garrigan: Thank you. One moment for our next question. And as a reminder, if you have a question at this time, please press star 1 1. Our next question comes from the line of Kevin Garrington from West Park Capital. Your question, please.
Speaker Change #146: Okay.
Speaker Change #147: Thank you one moment for our next question.
Speaker Change #148: And as a reminder, if you have a question at this time, Please press star one one.
Speaker Change #147: Okay.
Speaker Change #147: Sure.
Our next question comes from the line of Kevin Carrington from West Park Capital. Your question. Please.
Kevin Garrigan: Yeah, great. Thanks for taking my questions. And let me echo my congratulations on the strong results.
Speaker Change #147: Yes.
Kevin Carrington: Yeah, great. Thanks for taking my questions and let me Echo my congrats on the strong results.
Fermi Wang: Fermi, on the automotive side, I know you noted that, you know, you're more focused on autonomous driving and the market is pushing more towards EVs. But are you seeing combustion engine opportunities? And are any kind of automotive OEMs backtracking from originally thinking about developing EVs, maybe, you know, giving you opportunities in combustion engine or hybrid vehicles as well? Absolutely.
Speaker Change #150: For me on the automotive side I know you noted that.
Speaker Change #151: Focused on autonomous driving and the market is pushing more towards evs, but.
Speaker Change #152: Are you seeing combustion engine opportunities are in our any kind of automotive Oems backtracking from originally thinking about developing evs, maybe giving you opportunities in combustion engine or hybrid vehicles as well.
Fermi Wang: Absolutely not. I don't think AD is exclusively for EV at all. I think we will continue to see RFQs for combustion engine cars and also hybrid cars. So I won't say that's exclusive, but just like the first design wings, it just happened to be a pure EV company. And that also shows you that all the EV companies are trying to find possible differentiations other than just the battery life, but also adding AD capabilities is one way they can differentiate. So I think that this AD application will go to all kinds of cars, including both EVs as well as combustion engines.
Speaker Change #153: Absolutely I don't think.
Speaker Change #153: <unk> is exclusively for EV at all I think we continue to see RF queues for.
Speaker Change #153: For combustion engine cars and also hybrid cars.
Speaker Change #153: I won't say, that's exclusive such as Matt first design wings. It just happened to be a pure EV company and that also shows you that all the EV company trying to find it.
Speaker Change #153: Possible differentiations other than just the.
Speaker Change #153: Battery life, but also adding <unk> capabilities is one where they can differentiate so I think that this <unk>.
Speaker Change #153: Application well go through all kinds of car, including both <unk> combustion engines.
Kevin Garrigan: Okay, perfect. Yeah, that makes a ton of sense.
Speaker Change #154: Okay perfect Alright.
Speaker Change #154: On a cents.
Speaker Change #155: And then going off of Richards previous question you noted in your prepared remarks, AI and princes proliferating in multiple areas in your AI revenue would grow at 30%. This year you have a bunch of design wins and the pipeline is the AI inference market kind of taking off as quickly or not as quickly as you originally were kind of thinking and is it developing into.
Fermi Wang: And then, you know, going off of Richard's previous question, you noted in your prepared remarks that AI inferences proliferating in multiple areas and your AI revenue would grow at 30% this year. You have a bunch of design ones in the pipeline. Is the AI inference market kind of taking off as quickly or not as quickly as you originally were kind of thinking? And is it developing into as large of an opportunity as you had imagined? Well, for the most part,
Speaker Change #155: As large of an opportunity as you would imagine.
Fermi Wang: Well, on the IoT side, I think we do think that enterprise IoT is growing as fast as we expected. We get some surprises in the other IoT spaces, but I think that one thing that didn't grow as much as we expected is the automotive space. We have been investing heavily in the CB3 AD market, and we got the first design. I think there are a lot of things for us to work on to make sure that we can continue to take advantage of our investment in the AI inference engine in the automotive market.
Well for the Iot side, I think we do think that the enterprise.
Speaker Change #155: Iot is growing faster than we expected we gave some surprise on the other Iot.
Speaker Change #155: Our space, but I think that the one thing that.
Speaker Change #155: That.
Speaker Change #155: It didnt grow as much as we expected automotive we have been investing heavily on <unk> III <unk> market and we have a first design win I think there is a lot of things for us to work hard to make sure that we can continue to.
Speaker Change #155: Take advantage of our investment in the <unk>.
Speaker Change #155: AI inference engine in automotive markets.
Kevin Garrigan: Okay, perfect. Thank you.
Speaker Change #156: Okay perfect. Thank you.
Tore Egil Svanberg: Thank you one moment for our next question. And our next question is a follow-up to the line from Tore Svanberg from Stiefel. Your question, please.
Speaker Change #157: Thank you Budd moment for our next question.
Speaker Change #158: And our next question is a follow up from the line of tourists Lundberg from Stifel. Your question. Please.
Jeremy Lobyen Kwan: Hi, yes, this is Jeremy again. Just a housekeeping question. Did you provide the split between auto and IOT? And if you could just refresh us on what those splits were for the last couple quarters?
Jeremy: Hi, Yes. This is Jeremy again.
Jeremy: Keeping question did you provide.
Speaker Change #159: Look between auto and Iot.
Speaker Change #159: Okay.
Speaker Change #159: Yes.
Speaker Change #159: What's where.
Speaker Change #159: For the last couple of quarters.
Jeremy Lobyen Kwan: You're talking about the revenue split between OTO and IOT, is that a question? Yes, that's right.
Speaker Change #160: Youre talking about revenue split between auto and Iot.
Speaker Change #159: Sure.
Speaker Change #159: Yes, that's right yes.
Fermi Wang: Yeah, so if you look at last year, I think IoT was roughly two-thirds of total revenue, and auto was one-third. And if you look inside IoT, enterprise security still continues to be the largest portion. Last year, consumer IoT and other IoT were roughly the same size, but if you look at the growth this year, I think that inside IoT, enterprise, and the other side of IoT are growing faster. And also, we expect growth this year.
Speaker Change #159: So if you look at last year I think.
Speaker Change #159: Iot was roughly two thirds of total revenue and ortho is one third and if you look at inside of Iot Enterprise security is to continue to be the largest portion and the last year called <unk>.
Speaker Change #159: <unk> Iot and other Iot.
Speaker Change #159: Roughly the same size.
Speaker Change #159: If you look at the growth this year I think that.
Speaker Change #159: In fact, Iot enterprise and the other side of the Iot is growing faster than auto also we expect our growth this year.
Great. Thank you very much.
Operator: Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Dr. Fermi Wong for any further remarks.
Speaker Change #161: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dr. Fermi Wang for any further remarks.
Fermi Wang: Thank you everybody for joining us today, and I'm looking forward to seeing you, and talking to you on a conference call next time. Thank you.
Speaker Change #162: Thank you everybody for joining us today and looking forward to see you will talk to you in our conference call next time. Thank you.
Speaker Change #162: Thank you.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Speaker Change #163: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
Speaker Change #163: [music].
Speaker Change #163: Okay.
Speaker Change #163: Yeah.