Ambarella, Inc. (AMBA)

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Ambarella (AMBA)

Deutsche Bank Technology Conference

September 10, 2013 19:50 PM ET


Fermi Wang - CEO

George Laplante - CFO



Let`s get started with the next presentation. We have the management team of Ambarella, here both Fermi Wang, the CEO and George Laplante the CFO. Fermi Wang is going to start with a couple of slides to kick it off and then we'll go into Q&A and as we did in the last meeting, keep asking great questions, just please wait for the microphones so that we can hear you on the webcast.

So with that, go ahead Fermi Wang.

Fermi Wang

Thank you. First of all, I really like to be the last one today to present, because I know that whoever show up are the ones who care about our stories, and thank you for that.

I'll just spend a few slides to talk very high level about our company, and whereas the semi-conductor companies focus on digital video and if you look at our market that we are penetrating right now, there are four major markets and two big categories. The first category called -- is called infrastructure. If you are watching video at home, doesn’t matter its phones, Direct TV style US cable, you are basically watching video compressed by Ambarella technology, and it means, also should have seen broadcasting encoder on the [indiscernible] and sending a live video to your home. That's our infrastructure business.

On the other hand, we have a vista we can video capture, or video camera business and under video camera, we have a three major categories. First one is thus, we call sports camera, basically is a GoPro I think right now, probably a lot of people know about GoPro and they are doing very well as a supplier for sports camera and this category didn’t exist three years ago. GoPro made it happened and we believe they are the dominant supplier to this market and we are the sources for now for the GoPro until now and we believe this -- we believe this market is going to continue to grow with a more -- sort of a current momentum.

On the other second fleet market we are growing right now is called Digital IP Security Camera. In fact the security camera has been there for long time, but most of them will be analogue in the past and the transition from analogue camera to IP Security Camera happens starting five years ago and Ambarella has been planning things. And recently, we are starting Q2 transition rate from the analogue to a Digital IP Security Camera, in Q2 announcement we talk about our IP Security Camera unit shipment for the first time, out any other market that we have at Ambarella including sports camera. That shows you the growth of IP Security Camera. To the majority of our IP Security Camera starting to commercial business, but in the future we believe the consumer IP security camera selling to your home for mandatory purpose is going to come to grow and we believe that's going to be a huge growth for us in the future.

The third camera category is automotive. This is a camera that doesn't exist in the Europe or US. This camera sitting on the dash cam facing forward recording video while driving. The idea is simple. If there is an accident, you know you have video proof that you are not wrong. If you are wrong, there is a delete button there. So, but you can imagine that this has become a popular device in area where traffic is problematic and we've seen that the markets leading the Russia, China, Korea, Taiwan in the future I think India and South America could be a potential business. We believe this is an important business for us and more importantly we believe in the future automotive OEM business is going to continue watching integrating more camera and hopefully we'll get into that business in the future.

But in the future, we talk about few things that we're going to focus on. In today, I am only going to share two markets that we think in the near future we have a potential business. One is consumer IP cam; I mentioned that, that service provider like AT&T and Comcast are driving security camera to your home bundling with the IP service. In addition to that, really we believe we call wearable camera. Wearable camera is really a small form factor camera you can put anywhere on your body and recording video all the time and streaming video to the web service either through your smartphone directly connected to WiFi point. With that kind of function, you can imagine that there are many new applications are popping up in the future and we believe that wearable camera will become very important market segment for us in the future.

So with that, ask any questions.

Question-and-Answer Session

Unidentified Analyst

Great, thanks Fermi. Why don't we start off with George, you would be the one willing to do this, but you guys just reported earnings last week. So one way to give people kind of the right sizing and some framework on this is just talking a little bit about how you reported and what you guided and what the drivers were in the most recent quarter and guidance.

George Laplante

Yes, we reported 37.7 million in revenue, we guided to 43 million to 45 million in revenue for Q3. The real drivers in the first half of this year has been the security business. We have launched several new customers in that area. We saw a significant growth over the first half of the business. We expect that growth to continue but not at the same rate in the second half as we launched so many customers in the first half but we'll continue to contribute there. In addition to that, we had a strong first half in automotive but we will see some softening in the automotive area in Q3 of this year, but we return to growth in Q4. That's primary driven by a product transition that we've seen. We're launching a lot of new cameras in the Asian market based on our A7L products, so that will generate growth in the fourth quarter as they come out. We've also had some competition at the low end. In the China market in particular which what we've done there is we decided we will compete at the low end, but we will also focus on very limited number of customers and maintain a complete product offering at those customers, but price aggressively at the low end.

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