Q2 2020 Earnings Call
At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.
Finally, we should require operator said during the call. Please press star and then zero on your chest shown telephone as a reminder, this call is being recorded.
I would now like to introduce your host for today's conference Mr. Lewis care Hardy head of corporate development and Investor Relations you may begin.
Thank you Skyler.
Good afternoon, and thank you for joining our second quarter fiscal 2020 financial results Conference call.
Our speakers will be Dr., Fermi, Wang President and CEO and Casey Eichler CFO .
The primary purpose of todays call is to provide you with information regarding the results for the second quarter.
Of our fiscal 2020.
The discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results financial prospects market growth and demand for our solutions among other things.
These statements are 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 that we file with the FCC.
Including the annual report on Form 10-K .
Filed on March 29, 2019 for fiscal 2019, and the January 30, 31st 2019, and the Form 10-Q filed on June seven 2019 for the first quarter of the fiscal year ending January 31st 2020.
Access to our second quarter fiscal 2020 results press release historical results SEC filings and a replay of today's call.
Can be found on the Investor relations portion of our website.
Well now turn the call over to Dr. from a warm thank you Lewis and afternoon everyone.
Before I discuss all the results I will provide an update on geopolitical factors that may continue to impact our business you end up or higher truck harvests maki share shifts pitching all customers and supply chain issues continue to be potentially disruptive and as several of our customers in China continue to face the risk they may be added to the U.S. government industry looks.
Which could limit all restricts all shipments to them.
I listened point, our largest competitor in the security camera semiconductor market high silicon units over hallway is facing challenges that are helping us get market share.
As you can see there are multiple factors positive and negative that yield a wide range of outcomes for us.
We continue to demonstrate strong progress towards our strategy to transform from a pure video processing company to an AI and the computer vision company.
During Q2 or three customers, including one being the automotive markets generated a mass production CV revenue.
C. D design activity remains strong in Q2, we generated preproduction CV revenue by more than 40 customers.
Well don't mean engineering parts evaluation kits and or do you want him on board.
[noise] driven by demand for our core video processing portfolio, all come with those being all fiscal year 2020 Ali has increased.
Despite the geopolitical uncertainty.
Oh Q2 fiscal you're talking 20 revenue over $56.4 million was above the high end of our guidance range and as revenue increased 20% from the 47.2 media Unipart quota.
[noise] three factors are driving the strong outlook in our core business first underlying demand at all locked in security caramel customer in China has improved as noted by those customers in their recent earnings reports.
Circuit, good solid demand outlook for security camera is being fortified our global market share gains and sort of there is some inventory destocking in China.
[laughter] I will now talk about our progress youre targeting markets starting with security.
Well, it's simple personal security camera makers, increasing orders for shipments in the second half over here.
Yeah confusion forgive maki shares at a cost for outside of China as well as the Chinese customizable camera models to be exported to Europe and to the U.S.
Well also see widespread adoption of our CV solutions in the professional security camera market with both large established player as well as with a new group of emerging private players.
Well I'm excited to announce that haven't you won't Motorola solution company well be releasing its new H block eight eight AI powered the camera line in the coming weeks.
The new camera line lays the foundation for average loans next generation or we can pelagia video solution and a well offer a new era of our innovation in video security.
Based on Ambarellas C V 22, C. Buffalo Air processor, the new camera feature but you're also next generation video analytics that Leverages. The chips you don't I work based video processing and Oh. This image capabilities to help we come to life in the classified people objects was extremely high accuracy.
I enjoy German engineering giant Bosch.
Onwards, Ambrose was this prestigious Bosch Global supplier award for the energy and the building technology business.
The award recognizes and Bralettes pro Formas, even manufactured and the supply Oh products and the services, notably in the area of innovation quality cost and logistics.
This year Bosch awarded a 47, Oh, it's a 40 43000 suppliers representing its a top suppliers across a range of industry.
The in 15 different countries.
And Brad has been less supply away so see for both IP cameras for over 10 years.
During the quarter, leaving careers.
Security camera suppliers I walk, we released its new que sera, so camera with models reviews, all to make and the finally, GAAP resolution and taking box meaningful and the multi PTC form factors.
All of the new models are based on Ambarellas ATRIO AG VCA Sophie's I'll first swings in professional models are this customer.
Why I stated that they will use and brought the CV for Ace, we'll see as we introduce new camera was integrated capabilities.
Our the SEC International Security show held in London in Q.
New professional IP camera maker vial introduce Easter weekend dorm and the Putnam idled Remic camera based on Ambarellas C V 22, CB flow agencies.
With Embeda video and audio analytics powered by Albertsons smiles into and surveillance solutions can be packed threats in their early stage and the powerful fast and effective investigations.
I mean GOGAS your space to Chicago introduce its new umbrella basis see him 61 camera designed to give customers the flexibility to add the fukui do coverage everywhere.
The solutions hybrid cloud architecture supports ease of installation and the use of booking well minimize the bandwidth usage without sacrificing food quality or performance.
And even a couple of humor home monitoring market, which we previously mentioned it is the second wave. Our Cbram you you see increasing demand for camera solutions was a greater intelligence as customers demand Caremark was small motion detection notify use are only in the event that something interesting is happening.
In future such a camera will also be capable of I tend to find people as well as classified objects and that.
This level of intelligence will increasingly require dedicated how were either campus.
We also see cameras being offered as part of a broader I OTI equal systems that support a seamless integration with other devices in the home.
During the quarter, usually space, along dot com introduce it to be so when funky street and to be Fytwenty, three intelligent outdoor indoor camera based on in Bras Ace <unk> efficiencies and operating Wi Fi connectivity full HD video and night vision.
And since all small thing introduces a smartphone camera homeowners impairment based on Ambarellas Ace two L. M. A C.
30, $490 offers for HD video why in go operation HDR processing and the two way audio.
[noise] might shield, an AG company introduces likes your HD video doorbell could integrate seamlessly with is a security system.
Based on a broad based reality, so see the camera hoppers voice support for Amazon visa, allowing it to control alarm systems are just lightings and managing so sort of set we have always comments.
We are also seeing new opportunity people care must be integrated into small locks. During this quarter Hyqvia is consumer division easy vis introduced its a deal 30 V. As smart lock was a few being so when 20 P.Y. angle camera and night vision capabilities. These are bras ATRIO and you'll see the lot Karen welcome to quit intruders lurking and take a snapshot ordered recorded video clips to central the whole home.
In summary for IP security camera market ourselves on expanding both professional and the consumer markets are growing as we take market share and those we continue to make excellent progress integrating our CV flow resources into a next generation of our cameras.
I will now update you on our automotive market progress.
Teach why leading Korean automotive tier one formed.
One day, but mobile is a mouse that he has developed a camera bankruptcies, so say using cameras and monitors to replace a vehicle severe and the size deal meals, specifically enable vehicles to achieve greater fuel economy economy by eliminating the drag over samuels, while the cameras wide field of view enhance driver safety by reducing blind spot.
And before I close eight eight Q automotive ASE will see provides the image processing for all three of the video channels.
We're also seeing increasing interest in all computer vision Hazel see phone companies that provide the fleet management solution for commercial vehicles, such as trucks and buses.
Existing camera solution for commercial market typically lags in power Gen features and can only wrong Oh picks in the crowd.
With the boroughs CV blow portfolio of our chips. The solution providers can now deploy AI based applications such as from Adas active drug monitoring system and the blind spot detection in the vehicles LCB flow solution has been chosen by multiple providers in Asia and the USA was one July one generating mask without any revenue in Q2, and all is expect to be entering production by the end over the year.
We continue to win card recall the designs of Asian automotive Oems increasingly offer this feature in new car models as a pre installed option.
During the quarter Chinese carmaker TD introduces a new immigrants years and she'll models featuring.
D car recorder based and brought US 812, automotive peso Ses. Additionally, we won't maltose introduce its way the Vsix Ace you lead with a one camera in three camera DVR option piece off in Brazil. He told me and each 22 way Automotive Association and the new electric car. The O R. Eight our two featuring a recorder fees all he told me.
You know aftermarket dash camera category Korean supplier Thinkware amongst its Q XT may call me got recorder based on Ambarellas Ala automotive Ace, we'll see the first four channel full HD car recording career.
Additionally, we think were introduced pieces the 500, plus two channel dash camera based on drugs 812 AOCI.
Also in Korea fine digital introduce his gx 200 in the tier 2000 model based on a broad 812, so see featuring quite steep wrong and the switch Steve we are recording smartphone connectivity and auto language.
In summary, we're just starting to realize our vision to enable big data analytics in video aged endpoint devices or eight are in the camera.
This.
It does play out we expect to see multibillion dollar increases.
Addressable market.
Oh CB solution integrates our state of the art video processing Heritage was recently deployed deep neural network processor.
Neither did is I was going to now that customer who are experienced with our video processor processors are able to efficiently migrate to our CV solutions and LCV portfolio is also attracting new customers and expanding our customer base.
We are on schedule to realize the three waves of CV revenue articulate our last earning call I would be pleased to see the improvements in our Q3 forecast all core video processing products.
There are many distractions in the market today, and I'm thankful and bras global team is keeping up with the strong pace as fusion.
And also thanks to all of all stakeholders, including our 754 employees customers vendors and shareholders for our support.
Now I will turn the call over to Casey for the second quarter financial details on guidance for the third quarter of fiscal year 2020.
Okay.
Good afternoon, everyone.
Today I will review the financial highlights for the second quarter fiscal 2020, and provide a financial outlook for the third quarter fiscal 2020, as well as full year.
During the call I'll discuss 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 adjusted for the impact of taxes.
Our Q2 revenue of 56.4 million exceeded the high end of our guidance of $51 million to $53 million.
These results represent an increase of 20% from Q1, and a decrease of 10% when compared to the same quarter of the prior year.
In Q2 on a sequential basis security revenue increased auto automotive was relatively flat and other revenue was down.
non-GAAP gross margin for Q2 was 58.1% compared to 59.6% in the preceding quarter and was slightly above the midpoint of our guidance of 57% to 59%.
non-GAAP operating expense for the second quarter was 27 million compared to $29.9 million for the previous quarter.
This was below our guidance.
This was below our guidance range of 29.5 to 31.5 due to R&D grants of 3.2 million per night fiscal year 19 in the first half of fiscal year 2000.
We will be including this benefit on a quarterly basis in our operating expense guidance in the future quarters.
Other income was 2.2 million and primarily represented interest income on our cash marketable and marketable securities.
Net income for the second quarter was 7.3 million or 21 cents per share compared to 266000 or one cents per share in the first quarter.
The non-GAAP effective tax rate in Q2 was 9.1%.
In the second quarter.
The non-GAAP earnings per share were based on 33.9 million shares as compared to 3.5 million shares in the prior quarter.
Total headcount at the end of the second quarter was 754 with about 81% of our employees dedicated to engineering.
Most of whom are software engineers.
Approximately 70% of our total headcount is located in Asia.
In Q2, we generated positive operating cash flow of 8.1 million cash and marketable securities were 376 million up from 366 million at the end of the first quarter.
We did not repurchase stock during the quarter under the $50 million repurchase program authorized through June Thirtyth 2020.
Total accounts receivable at the end of Q2.
Were 27.9 million or 46 days sales outstanding.
This compares to accounts receivable of $26.5 million or 50 days sales outstanding at the end of the prior quarter.
Net inventory at the end of the second quarter was 17.4 million compared with 17.6 million at the end of the previous quarter.
Days of inventory declined to 67 days in Q2 from 85 days in Q1.
We had 210% plus revenue customers in Q2.
WT microelectronics fulfillment partner in Taiwan came in at 55%.
Hover revenue inch koning, a Taiwanese OEM, who manufactures from multiple customers came in at 21%.
I will now discuss the outlook for the third quarter of fiscal 2020.
For Q3 fiscal 2020, we are raising our revenue guidance above the current street consensus.
We expect total revenue for the third quarter to be in the 63 to 67 million dollar range, we anticipate all market segments led by automotive, but including security another to increase sequentially.
We continue to expect other revenue comprised primarily of consumer electronics products to remain volatile and decline as a percentage of revenue over the next two to three years.
Although forecasting is difficult in the current environment. We continue to expect our revenue to increase in the second half of the year when compared to the first half with fourth quarter revenue experiencing the normal seasonal sequential decline.
The global economic and political environment is generating a significant amount of uncertainty with our customers' outlook and our customer supply chains.
Three key factors are impacting our gross margin results and our outlook.
Our professional security camera business is experiencing strong underlying demand globally.
Combined with some restocking at our Chinese customers, they are growing faster than the market and with their purchasing power as the number one or number two suppliers globally. This puts pressure on our gross margin.
To support our increased revenue outlook and to manage supply chain challenges from geopolitical factors. We may also experienced increased costs as we accelerate orders to our suppliers.
In addition, rising tariffs may have a greater impact on our customers ability to sell their products incorporating our higher margin devices.
Based on these factors, we estimate Q through three non-GAAP gross margin to be between 56, and 58% compared to 58% in the second quarter.
We expect non-GAAP opex in the third quarter to be between 30 million and $32 million.
We expect to continue to provide positive operating leverage as revenue increases.
The Q3 tax rate should be modeled at 10% versus 9.1% in Q2 and 36% in Q1.
The tax rate has started to normalize from Q1 levels as our increased level of profitability enables tax losses in certain jurisdictions to be utilized.
We estimate.
Our diluted share count for Q3 to be approximately 34.4 million shares.
Ambarella will be participating in the Dougherty and company institutional Investor Conference on September 15, Minneapolis, and the 26th annual CLS, a Investor Forum on September 12 in Hong Kong.
Please contact Louis for more details on these events.
Thank you for joining us on our call today and with that I will turn the call over to the operator for questions.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your touched on telephone. If your question asked and answered or you wish to remove yourself from the queue. Please press the pound key.
Our first question comes from Joe Moore with Morgan Stanley . Your line is now open.
Great. Thank you.
Congratulations on the good results I Wonder if you could talk about the Chinese inventory accumulation you referenced it again any sense for how much that's contributing to the topline.
Last quarter, and this coming quarter and how long you expect that to continue to happen.
Well.
Thanks, Casey said I think the the upside that we have seen right now is a combination of Oh Chinese customer accumulating inventory as well as their business getting stronger and at this point is it's a half was what differentiates between this true. However, we continue to believe that our Chinese customer will continue to build our inventory until to a level they feel comfortable and that reflects on our Q3 forecast and but also because the ER visits to our ongoing business also had strong demand and the we that's why we are.
Provides us a higher.
Revenue forecast for Q3.
I do believe that with the uncertainty of all this is a two customer might get onto the entity list. They will definitely try to Peel tour.
Inventory level truly a comfortable.
Got it Okay, and then it seems like with the vigilant announcements or the other as you are starting to see real kind of announceable traction in the surveillance space can you give us a sense for when the CV contribution is that starting to become material in the second half and just.
Well if you look at your professional business next year.
Just kind of just give us a a qualitative sense for how much CV ramps within the portfolio.
All right like I said last time, we expected that we said that nine over 10 professionals, who cast customer are doing of design with us.
Now we are believing filed for that well gain to the mass production stage at the end of this year. So that we do see revenue coming out of this year, but I think the material revenue contribution.
Well couple of next year.
Particularly on the professional security camera side and that definitely help us together better gross margin as well as market share.
Great. Thank you very much.
Thank you. Thank you.
Our next question comes from Matt Ramsay with Cowen. Your line is now open.
Thank you very much good afternoon guys.
Hey, I guess.
Fermi you talked on the call about a number of different design wins and engagements that you guys have for the computer vision program. Obviously some are in China.
Many are not.
Maybe you could just talk a little bit and Casey, obviously chime in where you can but.
How do you feel about the pipeline for CV.
In terms of what percentage of that might be in China versus outside thank you.
I see.
First of all.
This is really the end sort of safety profile markets to markets. So let me repeat some of the thing we said first of all.
We said there are three CV customer input option.
With us at this time in Q3, you saw in Q2 and Q3 and.
I would say you know one thing I will touch on our children inside China, but if you look at I also talk about.
We have 40.
Revenue customer.
With our CV revenue customer this year this quarter and his own almost all of the email security camera as well as in old.
In security camera majority of his outside China.
And although I will say half a half, but I think that's definitely the split were seeing but one thing I have to say is that the momentum on the CV design that people are trying to buying the preproduction chip or evaluation boards that activity has continued to be strong for us.
Got it thanks for that for me.
I guess as a follow up question from me I think Casey in your prepared script.
You had mentioned that the guidance for the third quarter.
Would be led by automotive.
Maybe you could talk a little bit more specifically about.
Which programs you see ramping and the split across.
Maybe he mirrors and different types of cameras that are going into automotive that might be driving that revenue for the third quarter. Thank you.
On the product side I'll, let Paul It for me talk about that a little bit but clearly.
Of the revenue today is being driven in the automotive space by our our vision based or our video based products as we talked about in automotive.
The ability to get.
Mass production revenue office CB is a longer term story and that's why we talked about the first two waves being the professional security or surveillance and and.
And the consumer home that we talk about.
But I think it's kind of in the in the vision based initially we were led by the aftermarket in the video recorders and Thats not getting adopted more and more in the OEM is as we talked about in so that certainly is is leading the revenue in the auto space is the recorder business, but we are seeing traction across the announcements that they again from you've talked about in the EMA airspace, Kevin monitor driver monitoring in the flute and the fleet type of opportunities that we just announced during the quarter. So I think it will become more broad based but today. It's still is primarily driven by the by the video recorders right. As you can see that in our announcement, we mentioned few several design wins with Chinese and Japanese Oems will recall this but we also mentioned that we have.
Mass production product, we saw treiber mines, Asus and for the aftermarket business and Thats, a facelift will flip management was a CV revenue. So I think that also we announced that Korean company doing E. Miro with us. So although majority of the revenue Q3 revenue come from our recorder or especially the OEM recall. There's also we start talking about revenue coming from other portions of the OEM business.
Got it if I could just sneak one morning, guys. Keith you mentioned Q4 being normal seasonality. The last couple of fiscal years have been.
A bit abnormal I would guess maybe you can remind us what you guys consider normal for Q4. Thanks.
Yes, I think I think if you look back over.
A longer period of time say three to five years, you would see that.
Q4 is usually down in the low.
Low double digits somewhere between 12 and 15%. That's that's just based off of the last few years. So I would expect we'd see that similar type of activity.
In our Q4 as well, but as you point out sometimes youre surprised by by other activity. It's not always the case, but that would that would not seem to be unreasonable in my mind for for an estimate of of Q4.
Our next question comes from Adam Gonzalez with Bank of America Merrill Lynch. Your line is now open.
Hi, Thanks for taking my question and congrats on the strong results.
For me on your prepared remarks, you outlined the three factors that are driving or a better outlook for Q3 and the year I know, it's hard for you to decide for at least from a quantitative perspective.
How much is from inventory restocking versus just market share gains, but just qualitatively can you help us understand which is the biggest factor is it inventory restocking is it.
Better demand from your underlying security camera customers or is it you know this is market share gain factor that you mentioned.
Well correct you said, it's hard to really put the quantity on that however, if you have to be to prioritize those factors I think that our best estimate of the improved demand outlook is probably is really the number one and followed by the inventory restocking and also but the share again, although it is more than enough Showtime, resulting further I think the share gain has a more longer term impact to our revenue in the future, especially several all customer while switching phones, all competitive solution to us and you will take time for them to go into production, but cumulatively, even long term help us more.
For our revenue growth.
Got it and then on seasonality for Q4, I know you just mentioned.
Down call it 15%, but in the past I think thats really been driven by your outsize consumer exposure another that's kind of.
Meaningful part of the business just wondering what's driving that.
Steep sequential decline in Q4 specific well first of all that.
The consumer security camera is steel comes from what business right. That's one thing and also professional security camera as the year, usually that will show some weakness that's always our experience and the so I think we still expect that but it's typical for the seasonality to us this year.
Got it thanks, and if I can just sneak one more in I saw that R&D was down quite a bit in Q2, I'm just wondering what caused that and how we should expect that.
Moving forward.
Yes so.
As I mentioned, we had.
And R&D grant that totaled about $3.2 million in the current quarter.
That was accumulation.
As you remember at the end of last year, we we took a similar.
Grant and we we did that for fiscal year 2018, as we went through and calculated 19 started getting the benefit of 18 and looked at 20, we were able to book 19, and the first half a 20.
Based off of our starting to utilize the credit or the grant and.
And our ability to look forward. So now I think we have an ability to see how thats going to play out and we will be able to record that on a quarterly basis. So the guidance I gave for Q3 that incorporates anything that would comment I'll do that continually into the future quarters, but this is if you will a bit of a catch up.
As we as we move forward you won't see that in so thats why the R&D is going back or the opex is going back to normal levels.
Great. Thank you.
Our next question comes from Quinn.
With Needham and company. Your line is now open.
Hi, guys.
So I guess first on the AI based professional camera market and the the market size in calendar 2019.
I believe you guys is that before the eye vision.
Is the largest player there and they shipped about a million units units in 2008.
They were targeting 3 million. This year. So I was just trying to see is that still in line with you know.
Or you know is that still their expectation are you guys hearing anything different there.
Any any idea to kind of get a unit perspective that would be good.
You have to like vision is a focus for <unk>, yeah based camera right exactly yeah. Yeah. Yeah. So you know when we told you that I think that 1 million units was history. So last year number. So I think that's done I think they are still who he has a significant growth they haven't given us a new update on that but I think they are probably on track to get to that level, maybe a little less maybe a little more but I definitely think the growth of our last year to this year in terms of air camera is significant for Hikvision.
And and.
They still haven't given any sort of target for 2020 have all right.
We haven't seen any yet.
And then just another one on the Chinese automotive market I'm guessing many design activity.
With the automotive OEM in China, there are due to the trade kitchen.
Maybe any other signs that Chinese Oems are becoming increasingly cautious.
Designing right.
You know due to the trade relations.
Even from the just purely from the trade excuse me Oh.
Point of view I don't think we have we got any feedback from our automotive OEM, our tier one customer in China, I don't think they care that.
I don't think that the emphasize on that on a point or we haven't seen any resistance on design wins using.
External solution, so far I think the majority of the.
Resistance come from our Chinese China, our security customers, especially the Truebeam mentioned by that.
Potential to be put on the entity for us.
In general in autos in automotive Chinese market I really think that the biggest impact is that growth. This year was relatively weak compared to the historic data and so that a lot of people trying to figure out how to.
Move to a new direction at differentiation to the car and I reading Diversey the function of Steven CV features could be is a one direction on many Chinese OEM the tier one focusing on so that's definitely something we see and like I said I don't see any over there has are concerned.
Now because of the trade.
And one last one.
Hey, maybe.
Additional enforcing.
Or dahua I, you know given the threats being added to the list.
No. There is no we don't see any other.
Enforcement, we have that other than what we would have to talk about so this isn't the same thing, but I think the pressure is still there is really about our customer want to make sure that they prepare for the worst and thats why they continue to pushing the products from us.
Hi.
Thanks.
Our next question comes from Charlie Anderson with Dougherty and company. Your line is now open.
Yeah. Thanks for taking my questions and congrats on the strong results.
And guidance so.
Just wanted to look into the 40 customers or so that are you know preproduction revenue at this point I Wonder if maybe you could speak to some of the Mark applications, you're seeing from some of those customers what are the more promising ones in terms of underlying volume and then I've got a follow up.
Yeah, I think the.
You know that's the 40 customer basically fall into that three waves. So CV revenue, we talk about lifestyle. The first wave is a professional security you can imagine that although that 40. It covers almost all the major brain then professional security camera brand then I'll there plus several of US dollar company focus on using CV as a differentiation for the professional security camera. So that's a big chunk of the the 40 people and also we are start seeing some consumer security camera demands and where there are a few companies in that category and then the auto side, there's a huge amount of.
Of accompanied by separate into multi deeper in the category. There are some of the using CV purely for Dms somebody using for Kb monitoring some using for Ada has some level of your email for the blind spot detection. So although there is a.
Quite a few automotive Carson very few dividing into deeper in the category, you'll see several in each category in that so if im other 40 portfolio companies I will say that the security camera and auto probably.
Equally split.
Great and then for my follow up for me I Wonder if you could just give us an update on the Hell Laguardia partnership kind of roughly works out in terms of responding to RFP is or are you are you actively in in that phase at this point and maybe timeline of when we might start to see some volume associated with that partnership. Thanks, right. So for the Hana Guy out we continue to.
Work together on porting.
More of their dealer network.
Yeah. It was an onto our our Praful I think the major milestones for the this collaboration is because a that's required so chip. So we believe that our current software preparation on our current cdtwenty two or three to eight Q chip is really preparing that the software reighty four eight so chip when it comes out so I think we continue to work on the software algorithm development and as soon as the hour. So chip come out you should expect that the software. We brought on April chips organ damage to the OEM together and the demo to Oems continue to happen. We saw eight future just that we have to come out with a so chip to to get into the mass put off for the final production.
Ready solution.
Got it okay. Thanks, so much.
Again, if you have a question. Please press star and then one our next question comes from Suji de Silva with Roth Capital. Your line is now open.
Hi, Fermi Hi, Casey congratulation on the strong results here, there's just to be clear kick just to be clear Acacia and inventory restocking I, just wonder stand whether the relative impact of it was stronger in the reported that's a fiscal second quarter or are they guided fiscal third quarter, and just along with that and the guidance for seasonal fiscal fourth quarter are you no longer comprehending inventory restocking continue into that timeframe.
As for me I think referenced it's hard for us to know exactly we're having good visibility into that I think that there's no question that there are they are they are going to restock and build some inventory for the reasons that we discussed earlier I I would agree with the order of priority of the firm you said in the earlier question a bit but it's a combination of both and definitely affected this quarter and will affect next quarter as well, where we don't have perfect visibility into Q4, there there could be some activity in Q4 as well, but I really think what youre going to see continue over the next few quarters is the strength that hikvision and Dahua I've talked about in the market overall and the growth that they're seeing outside of all of this I think the overall, Oh home monitoring and surveillance market as well as the professional market are going to be pretty good and so we should see pretty good growth in particular with.
Some of the CV products coming online just to remind you. They do have two times. The ASP is the comparable vision only systems and so I think that.
The restocking is a part of the current dynamic with the global tension that we see but really I think the story as we get out into next year pass the seasonal aspects that we talked about in Q4 is really going to be that revenue building not only division based products, but primarily or in particular in the in the CD products as the second wave starts to come in in the consumer side.
Okay understood Yeah, and then in the professional security Mark I know you couldn't give the specific on maybe what hikvision was expecting for AI professional cameras and 20, but maybe more broadly could you talk about in calendar 2000, what you might think given all the programs you have an interest what the attach rate for me is of AI potentially to national security cameras, maybe a range of <unk>.
Range of attach rates and that caliber 20 timeframe.
Switch I think it's hard for me to predict at this point because really depends on the the pricing and the marketing strategy for our current customers, but one thing I can say is we are seeing our customer.
Spending more and more resource building CV based product AI based products and.
I think next year I will probably expect customer building more CB skews then the video skews are moving forward.
So I I have to believe that the attach rate will start ramping up next year is it we're going to be see next year, probably the first thing I want to see material revenue Fung security camera customer, but I do believe that.
Could be.
Very good ramp up for us.
But again there is no data to support it it was really a coffee more than.
Analytics.
But the point I make it for me is that the new skews coming on next year. The majority will now have CV incorporated that's that's what you're saying.
That's one of the exciting I, saying, yes.
Okay, that's very promising all right great. Thanks, guys. Congrats again.
Our next question comes from Dust, Richard with Northland. Your line is now open.
Yes, thanks for taking the questions congratulations on the on the good results.
Yes, basically kind of implementing social scoring.
The numbers I see you're about 600 million cameras by the end of 2020 up from about 180 and 18, how much of this professionals security camera demand is coming from.
China in terms of internal consumption and how fast do you think the overall market is growing and I got a follow up.
Well first of all I think.
The.
Hydrogen dot wise told me our strong demands on their for their products I think that.
Our progress.
That we shift to hybrid into our many use in their export business.
And I think this market could probably provide a secure security camera continue grow I would say at a high single digit point, maybe hikes dahab probably is higher than the market. So I think this is a trend we're continuing to see you know professional security camera.
Okay. So so the strong results are a function of.
Market share gains primarily.
Our market share again.
Yeah, and I'll say outside China, particularly that we are continuing to see market share gains.
Got it and then and.
Manufacturing and Samsung.
It looks like the only the UBI photos this is gonna be banned.
You know in conversations with Samsung your foundry what are they telling in terms of availability capacity moving forward.
[noise] majority all products are still in the.
20, 814, and moving to 10 nanometers. So we are not easily yet and when we talk to them. So they basically gave a guarantee that our current product line will not be impacted by this Japan Korea and a patients.
Got it thank you so much.
Thank you thanks guys.
Our next question comes from Richard Shannon with Craig Hallum, Caroline is now open.
Hi, guys. Thanks for taking my questions as well, maybe kind of a multipart question. The security market. I think you said you're engaged with nine of the top 10 Oems with expecting to ship five CV a this year, maybe if you can talk about.
When do you expect any of the other four remaining wants to be shipping at some point next year any visibility on that and then any discussion about competition you talked about a few the bigger public players out there, but wondering if still that's the competitive profile is any new entrants you're seeing out there.
Right. So for the balance of the CBD is I mean, we definitely believe all of the rest well probably go into production sometime sometime next year.
And that's our current visibility and with the progress we've made I will be a confident that all of that will be in production sometime next next year in terms of a competition on the CV side I think high silica remains to be our biggest competitor. The while you know that the media I was trying to be there and the entire about ball to their movidius, but I really think that the amount all come to Qualcomm also tried to come to this using the app processors, but full as professional security or consumer security camera market. We continue to believe that a high silica lumpy our biggest competitor moving forward.
Okay. Just a quick follow up on that for me do you expect to any particular customer, especially in those top tend to be a using 101 or another solution or do you think it will be a mix of more than one supplier, especially TV solutions to be specific yes, well.
I have to believe that the all of that will try to have a few suppliers.
At this point I think the design, we will announce so far they are using our solution and but you know for example, I think sowell customer using having their own solutions sooner or later, they will probably have they own CV chips and use so they have a fuel source 1000 ton, though one of our us so that's a possibility.
Also I think outside of yours right now I think we have we're in very good position for this AI based the security camera and eventually people will find out how to compete was on the low end, but on the higher side I think we're in a relatively good position.
Okay, Great. That's all the questions for me. Thank you.
Thank you.
At this time Im showing no further questions I'd like to turn the call back over to Mr. Wang for closing remarks.
And the thank you, especially thank you for all of you for joining US our earnings call today, and I will talk to you guys next time, Thank you and goodbye appreciate it.
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.