Ambarella Inc Q4 2024 Earnings Call Transcript

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

Question: Neil Young - Needham & Company, LLC - Analyst : Hey, this is Neil Young on for Quinn Bolton. Thank you for taking my questions. So you said you were seeing project delays from Tier 1s and OEMs, as well as volume reductions in planned projects, which you called out more of an inventory issue. Is that inventory improvement progressing ahead of where you thought it would? And if so, are you starting to get the sense that these projects will resume soon? And then I had a follow-up.

Question: Neil Young - Needham & Company, LLC - Analyst : Yeah.

Question: Neil Young - Needham & Company, LLC - Analyst : Okay. So on the auto side, regarding inventory, you aren't seeing any improvements?

Question: Neil Young - Needham & Company, LLC - Analyst : Okay. Thanks. And then for my follow-up. So in the past, you talked about how the first CV3 revenue would come from China. I believe in your opening remarks, I heard you say you're engaged in discussion with multiple Tier 1s and already have multiple design wins on the way. If that's the case, when do you think you'll see first revenue from those wins? And then maybe just an update on the demand environment in China.

Question: Christopher Rolland - Susquehanna International Group, LLC - Analyst : Hi, thanks for the question. Just about your N1 product, maybe any more thoughts on how large this could be for you guys? Have you considered or has anyone talked about combining multiple chips into a server or appliance? And then lastly, does this meet the Chinese compute restrictions for import as well? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2024 / 9:30PM, AMBA.OQ - Q4 2024 Ambarella Inc Earnings Call

Question: Christopher Rolland - Susquehanna International Group, LLC - Analyst : Great. Thank you for your comments.

Question: Christopher Rolland - Susquehanna International Group, LLC - Analyst : Great. Yeah. Maybe around the kind of edge AI and camera opportunity. Maybe if you could describe that. I mean, there's so much focus on auto. But next gen, like security cameras with all this AI functionality, what are growth rates for that market? Do you have now visibility into a funnel to kind of refresh that and to revigorate that market? And what kind of growth could we be talking for kind of that edge market as well with your products? Thanks.

Question: Matt Ramsey - TD Securities(USA)LLC - Analyst : Good afternoon, guys. Thank you. I guess, Fermi, I wanted to follow up with you on some of the initial feedback on the N1 from an inference perspective. And I guess it's not a surprise to me, given that the engineering and architecture team is getting good feedback on low-power inference. I guess my question is, as you get that good feedback and you're interacting with customers that can potentially ramp this product over time, given kind of where the P&L is for you guys right now during the correction, what's the business model over the next 12 to 18 months to start to really build a business around this and get something that could ramp at scale, given the software investments that you need, et cetera? Are customers willing, and are you willing, to do sort of NRE payment arrangements? Are people willing to invest alongside you on software? I'm just trying to figure out. I can see big potential here, but there's also some limitations on capital, given where the business is. And I'm trying to understand what the discussions are to get you from point A to point B if this is going to be a big product.

Question: Matt Ramsey - TD Securities(USA)LLC - Analyst : Thank you for all the thoughts there, Fermi. I guess as my follow up question, where the revenue levels are right now, you guys have been consistent the last couple of quarters that you're working with the customer base to burn through inventory that they had built. And you're clearly under shipping in sell through by a pretty significant margin to do that. So, I mean, I asked this last quarter and maybe it was too early to ask, but now that we've had three more months, do you have a field now as to what the steady straight sell through revenue level of the business is currently just with the designs you've won, particularly in the security camera businesses? What's sell through and what's the market size right now after we've gone way up and then way down on the inventory correction? What's kind of the steady-state sell-through that you're under shipping to burn through inventory? Do you have an estimate for that? Thanks.

Question: Tore Svanberg - Stifel Financial Corp - Analyst : Yes, thank you. My first question for me, so you talked about fiscal 2025 you expect to see growth in both auto and IoT. I was just hoping you could give us a little bit more sort of the puts and takes on how you think the year to progress. Obviously, there's still probably some lingering inventory, especially on the auto side. But yes, any more color you can give us as far as the growth you're expecting in both segments this year?

Question: Tore Svanberg - Stifel Financial Corp - Analyst : No, I'm talking about your -- you mentioned you expect both segments to grow this year. So if you could just give us a little more sort of the dynamic.

Question: Tore Svanberg - Stifel Financial Corp - Analyst : Yes, that was very helpful. As my follow-up, I was pretty impressed with the new Cooper development platform when I saw your samples at CES. And I was just wondering how that development platform is helping you secure more business activity because it does seem like it was an important piece of the pie that was missing, but obviously now that you have it readily available.

Question: Ross Seymore - Deutsche Bank Corporation - Analyst : When I think about the ASPs that you mentioned, going from CV2 to CV5 or even backwards looking to the CV2 itself, can you just walk us through again kind of orders of magnitude or rough pricing ranges? How much for ASP is a tailwind in calendar year 2024, and what do you expect them to be in calendar 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2024 / 9:30PM, AMBA.OQ - Q4 2024 Ambarella Inc Earnings Call

Question: Ross Seymore - Deutsche Bank Corporation - Analyst : Great. Thanks for that detail, Fermi. And then I guess you talked about the year and growing in both sides of the business. Obviously we have the first quarter guidance and talked about a little bit of the trajectory in a prior question on both your two sides of your business. But if we think about the second half versus the first half, it seems like you need some relatively sizable sequential increases on a percentage basis to get to that sort of number. Do you think you will be well within those average of roughly $70 million true sell-through numbers? And if so, is that kind of a second-half dynamic? And I guess, is that more just about shipping to demand? So the inventory headwinds abate, or is it about new products ramping?

Question: Kevin Cassidy - Rosenblatt Securities Inc. - Analyst : Yeah, thanks for taking my question and congratulations on the strong results. Just on your N1, as you're talking to customers about it, what is the competitive landscape? What are some of the alternative designs that they're looking at? And is the GPU still being considered even as an edge processor? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2024 / 9:30PM, AMBA.OQ - Q4 2024 Ambarella Inc Earnings Call

Question: Kevin Cassidy - Rosenblatt Securities Inc. - Analyst : Great. Thanks. And it seems to me you're getting a lot of leverage out of the 5-nanometer process. You've got lots of parts, price performance

Question: Joe Moore - Morgan Stanley - Analyst : Great. Thank you. Fermi, you had alluded to some OEM wins for CV5 that start to ramp in the second half of the year. Can you talk about what applications you're addressing there?

Question: Joe Moore - Morgan Stanley - Analyst : Great. Thank you for that. And then I guess as far as the N1 product goes, you guys have kind of always shied away from doing anything in a phone because you don't want to become a feature in a chipset. But obviously a lot of the potential large language model inference could be in devices like phones. So can you just talk about, are there opportunities around that to do co-processors? Or where do you kind of draw the line at your participation?

Question: Joe Moore - Morgan Stanley - Analyst : Great, thank you very much.