Ambarella, Inc. (AMBA)

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Ambarella (AMBA)3

F3Q 2013 Earnings Call

December 5, 2012 5:00 p.m. EST

Executives

Deborah Stapleton – IR Counsel

Fermi Wang – President and CEO

George Laplante – CFO

Analysts

Ross Seymore – Deutsche Bank

Kevin Cassidy – Stifel Nicolaus

Vidya Adala – Morgan Stanley

Quinn Bolton – Needham & Co.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Ambarella fiscal Q3 2012 financial results conference call.

At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Deborah Stapleton. Ma'am, you may begin.

Deborah Stapleton

Thank you. Good afternoon everyone and welcome to Ambarella's Q3 FY '13 conference call. Our speakers today are Dr. Fermi Wang, President and CEO, and George Laplante, CFO.

Before we begin, I'd like to remind you that the primary purpose of today's call is to provide you with information regarding our fiscal third quarter 2013 performance. The discussion today and the responses to your questions will contain forward-looking statements regarding our financial prospects, market growth and demand for our solutions, among other things. These 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. All of the risks, uncertainties and assumptions, as well as other information are potential risk factors that could affect our financial results are more fully described in the documents that we file with the SEC, including the final prospectus for our initial public offering. Access to our third quarter results press release and historical results, SEC filings and a webcast replay of today's call could all be found on the Investor Relations portion of our website.

Now I'll turn the call over to Dr. Fermi Wang.

Fermi Wang

Thank you, Deborah, and welcome everyone to Ambarella's first conference call as a public company. Thank you for joining us today.

First of all, we are very pleased with our fiscal Q3 results. Revenue of $35.7 million, up 24% year over year. Non-GAAP net income was $8.1 million or $0.31 per diluted ordinary share, up from $5.9 million or $0.23 per share for the same period a year ago. Our gross margin was 64.5% compared with 65% in Q3 of 2012. Overall a very healthy quarter for Ambarella. Thanks to all our employees for their dedication and hard work to achieve these results.

We continued our revenue growth in the sports camera, automotive and IP security market in this quarter. Revenue in our broadcast market was steady and consistent with our expectations and continue to deliver solid gross margin.

In the expanding sports camera market, Q3 saw the leading sports camera brand, introduced new product family based on Ambarella's A5s and A7 SoC. This improved the first variable sports camera with support for both 1080p60 and 4K Ultra HD video revolution. Additionally, many of the sports camera now include WiFi connectivity to smartphone, enabling the phones to be used as the viewfinder, remote control, and also providing video playback. The smartphone also being able to video, upload and streaming to internet.

GoPro, a leading maker of wearable sports camera, introduced its HERO3 family of camera that include WiFi and 4K video options, both based on Ambarella solutions. Liquid Image, another of our sports camera customers, won the 2013 CES Innovation Award for two of its new products, the EGO WiFi-equipped mountable sports camera and Apex HD camera snow goggle. And the Drift Innovation, a European maker of sports camera, just introduced the HD Ghost, a wireless connected HD camera. Both of these are Ambarella solutions. We expect this market will continue to expand as consumers are increasingly enjoying the benefits of hands-free action sports capability and the ease of use enabled by wireless connectivity to smartphones.

In terms of the IP security market, we're enjoying rapid growth. Our revenue from this market grew sequentially year over year in the third quarter, driven by growth in the market as well as design wins with both new and existing customers. During Q3 we saw continued growth in the professional IP camera market led by major IP camera makers, including Axis of Sweden, the market leader in IP camera, Bosch of Germany, and [Amaturo] of Canada. Axis and Bosch both introduced multiple new HD camera based on Ambarella solution during this quarter.

The market for security camera is transitioning from analog standard-definition camera to digital high-definition camera, transmitting video over IP networks. Camera makers are looking for higher-resolution video with improved low-light performance to enable tracking and identification of people and objects.

Additionally, cameras are becoming increasingly intelligent, building analytics software to perform functions such as motion detection, face tracking, trip wire, and people counting. In September, Ambarella introduced its A2 IP camera system on chip especially to address this demanding professional security market requirement. This SoC supports a new 4K Ultra HD video standard and delivers multi-core secure performance with better -- another big acceleration. Designed in 32nm process technology, the A2 uses very little power and enables development for higher-resolution video cameras in compact form factor. The A2 gives our customers a platform to create highly-intelligent IP camera with outstanding image quality.

Read the rest of this transcript for free on seekingalpha.com