Ambarella Inc Q3 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Edouard Buscaglia - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : I wanted to follow up on -- you talked about the computer vision as a percentage of sales, around 25% next year. So that's much -- I was modeling out, that out and I came to just under [20]. So I'm wondering, it seems like you guys are pretty optimistic here. And I'm wondering if you could provide maybe some sort of breakdown of what that comprises of next year? I imagine it's mostly professional security, but do you have any other like color you can add as to how that -- the makeup of that 25%? Feng-Ming Wang - Ambarella, Inc. - Co-Founder, President, CEO & Executive Chairman Yes. First of all, I think you are right, a big part of that 25% is from a professional security camera. However, we also mentioned that we believe we control our consumer -- sorry, our home security camera business will ramp up with CV -- CV product next year. And we also mentioned that we think it could be material next year for the revenue point of view, but also, more importantly, on the CV -- on the automotive side, I think our -- there is some CV revenue -- short-term CV revenue opportunity that we can ramp up, particularly in China, commercial vehicle and also the [bases]. While outside China, we talk about fleet management, all the fleet management customer outside China are using our CV chip for ADAS as well as driver monitor applications and also believe that, that business will ramp up. So I think they are all the potential business opportunity for us for fiscal year '22, but I think you're absolutely right. The professional security camera will be the biggest part of it.

Question: Andrew Edouard Buscaglia - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes. Okay. Interesting. And then maybe last one for me. You said -- you had some interesting commentary around the security market over 3 to 5 years adopting computer vision. Are you essentially saying products that you see being sold 3 to 5 years from now will have to -- I guess, what's prompting people to upgrade to these new CV capabilities? Is -- what are the drivers behind that? Because that could be a pretty big upgrade cycle. Feng-Ming Wang - Ambarella, Inc. - Co-Founder, President, CEO & Executive Chairman Well, for professional security camera, the biggest driver is the following: In the past, all of the computer vision is down the server side. And that requires to transmit all the video to the server and store there and do the video analytics or computer vision off-line, which is okay for maybe 1 million units of camera, but if you want to scale to media, many tens of millions or hundreds of millions of camera that add to the huge pressure, not only on the bandwidth infrastructure, but also storage cost. So -- and when we talk to customer, they all agree, the only solution for that is to apply computer vision on [age] so they only send -- analyze the data back to the server and only apply some analytics on video data on this cloud when it is required. That will dramatically reduce the requirement of the transmitting of video and the server storage and server computation. And that's a huge investment for saving for our customer. That's why we believe that we're going to continue to see the trend, but on the other side, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 23, 2020 / 9:30PM, AMBA.OQ - Q3 2021 Ambarella Inc Earnings Call however, the difficult part is that the current CV camera is a lot more expensive video processor camera, but however, that's why I said in 3 or 5 years, the economy will bring down the cost of the camera, will make this more attractive to our customer to replace that. So there's a huge driver purely based on the technology reasons, but I think the financial reason will come in 3 to 5 years to make this happen. Our internal forecast, we believe that our CV revenue will continue to go up at a big percentage just because of that. And also in the auto side, we also see the same thing: in the future, all of new design win that we are winning, majority will not CV related because even you don't need CV, but -- CV in a car today, but people want to put CV processing in there just so they can have a future upgrade. And this is a future-proof criteria really help us to design a lot of CV chip for the automotive opportunities.