Ambarella, Inc. (AMBA)

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Ambarella Inc. (AMBA)

F2Q 2014 Earnings Conference Call

September 05, 2013 05:00 PM ET


Deborah Stapleton - IR

Fermi Wang - President and CEO

George Laplante - CFO


Ross Seymore - Deutsche Bank

Kevin Cassidy - Stifel

Glenn Bong - Needham and Company

Joe Warr - Morgan Stanley



Good day ladies and gentlemen and thank you for standing by and welcome to the Ambarella’s Second Quarter Fiscal Year 2014 Earnings 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 be given at that time. (Operator Instructions). As a reminder, today's conference maybe recorded.

It's now my pleasure to turn the floor over to Deborah Stapleton. Ma’am the floor is yours.

Deborah Stapleton

Thank you so much and good afternoon everyone and welcome to Ambarella's second fiscal quarter financial results conference call. Thank you for joining us today. Our speakers will be Dr. Fermi Wang, President and CEO; and George Laplante, CFO.

The primary purpose of today’s call is to provide you with the information regarding our fiscal second quarter. The discussion today and the responses to your questions will contain forward-looking statements regarding our financial prospects, our 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. 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 SEC, including the Annual Report on Form 10-K that we filed on April 4 for the 2013 fiscal year and the Form 10-Q which will be filed shortly.

Access to our second quarter results press release, historical results, SEC filings and a replay of today's call can all be found on the Investor Relations portion of our website. I'll now turn the call over to Dr. Fermi Wang. Fermi?

Fermi Wang

Thank you, Deborah, and good afternoon everyone. We are very pleased to report our Q2 revenue was $37.7 million, up 35% from the $28 million we reported in the second quarter a year ago. Q2 non-GAAP net income was $7.7 million or $0.26 per diluted share. This compares with the non-GAAP net income of $6.2 million or $0.23 per diluted share for the same period in fiscal 2013.

I would like to discuss some of our products and the market highlights and then I will turn it over to George for more in depth discussion of our second quarter financial performance and our guidance for Q3. The second quarter results was supported by strong performance in all of our core camera markets while the infrastructure market continue to reflect market softness.

Our camera growth in the quarter was led by strong performance in IP security camera markets and for the first time we estimated that IP security camera unit shipment exceeded all other individual camera categories.

We continue to benefit from a migration of analog to CCTV to high-definition digital IP designs as well as our range and the feature rich product offerings. Successful customer penetrations with A5s family of SoCs is fielding our current growth throughout the introduction of S2 family of SoCs that enables 4K resolution and advanced analytics into maintaining our technology leadership position in this market.

In the second quarter, we saw sales growth in our security business across all regions. But in particular we experienced significant positive momentum from our business in China. This was driven both by professional high-definition IP camera as well as consumer camera designed for home monitoring use.

Additionally, Chinese manufacturers are increasingly providing solutions, not only to domestic markets but also on an OEM basis to customers in other geographies. In July, Techvision, a China based global leader of video surveillance products announced availability of its new camera family offering 2 million pixel and a 1.3 million pixel resolution with 30X optical zoom availability. These cameras provide a long range of visibility even under challenging lighting conditions and update on Ambarella's A5s SoC solutions.

In the consumer IP camera market, we see new opportunities driven by Cloud based internet services and remote smartphone monitoring. This category includes both standalone Wi-Fi cameras as well as security systems that include a network video recorder bundled with high definition IP camera to provide video recording for multiple locations.

Swans recently introduced a platinum [ph] full HD security system based on Ambarella's A5s chip are actually example of this product category. Swans is a global leader in security monitoring systems and is based in Australia. We believe Ambarella is well positioned to benefit from the growing trend to a higher resolution, increased analytics and a better video quality. Ambarella's A5s SoC family has seen widespread adoption providing an excellent combination of high quality full HD encoding with very low power and excellent low light performance. Additionally Ambarella's new S2 SoC family enables resolution up to 4K and supports advanced analytics capabilities.

In the consumer camera market sales of wearable sports and automotive aftermarket cameras continue to be strong in the second quarter. The sports camera market continued to push for higher resolutions and faster frame rates to meet the performance demand of sports camera user.

Revenues in the quarter were led by good growth in Q3 [ph] camera family that includes white, silver and black models, which use Ambarella's A5s and A7 SoCs. All models support full HD recording and Wi-Fi connectivity while the black model introduced last November is the first consumer sports camera to support both 1080p 60 and the 4K for UltraHD TV resolution.

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