Ambarella, Inc.  (NASDAQ:AMBA), a leading developer of low-power, HD and Ultra HD video compression and image processing semiconductors, today announced financial results for its second quarter of fiscal year 2018 ended July 31, 2017.

• Revenue for the second quarter of fiscal 2018 was $71.6 million, up 10.0% from $65.1 million in the same period in fiscal 2017. For the six months ended July 31, 2017, revenue was $135.8 million, up 11.0% from $122.3 million for the six months ended July 31, 2016.
• Gross margin under U.S. generally accepted accounting principles (GAAP) for the second quarter of fiscal 2018 was 62.6%, compared with 66.7% for the same period in fiscal 2017. For the six months ended July 31, 2017, GAAP gross margin was 63.2%, compared with 65.6% for the six months ended July 31, 2016.
• GAAP net income for the second quarter of fiscal 2018 was $3.3 million, or $0.10 per diluted ordinary share, compared with GAAP net income of $8.6 million, or $0.25 per diluted ordinary share, for the same period in fiscal 2017. GAAP net income for the six months ended July 31, 2017 was $5.9 million, or $0.17 per diluted ordinary share. This compares with GAAP net income of $10.4 million, or $0.31 per diluted ordinary share, for the six months ended July 31, 2016.

Financial results on a non-GAAP basis for the second quarter of fiscal 2018 are as follows:

• Gross margin on a non-GAAP basis for the second quarter of fiscal 2018 was 63.0%, compared with 67.1% for the same period in fiscal 2017. For the six months ended July 31, 2017, non-GAAP gross margin was 63.6%, compared with 66.0% for the six months ended July 31, 2016.
• Non-GAAP net income for the second quarter of fiscal 2018 was $16.5 million, or $0.48 per diluted ordinary share. This compares with non-GAAP net income of $18.5 million, or $0.54 per diluted ordinary share, for the same period in fiscal 2017. Non-GAAP net income for the six months ended July 31, 2017 was $29.9 million, or $0.86 per diluted ordinary share. This compares with non-GAAP net income of $29.9 million, or $0.88 per diluted ordinary share, for the six months ended July 31, 2016.

Based on information available as of today, Ambarella is offering the following guidance for the third quarter of fiscal year 2018, ending Oct. 31, 2017:

• Revenue is expected to be between $87.5 million and $90.5 million
• Gross margin on a non-GAAP basis is expected to be between 62.0% and 63.5%
• Operating expenses on a non-GAAP basis are expected to be between $28.0 million and $29.5 million

Ambarella reports gross margin, net income and earnings per share in accordance with GAAP and, additionally, on a non-GAAP basis. Non-GAAP financial information for the second fiscal quarter excludes the impact of stock-based compensation adjusted for the associated tax impact which includes the effect of any benefits or shortfalls recognized.  A reconciliation of the GAAP to non-GAAP gross margin, net income and earnings per share numbers for the periods presented, as well as a description of the items excluded from the non-GAAP calculations, is included in the financial statements portion of this press release.

Total of cash, cash equivalents and marketable securities on hand at the end of the second fiscal quarter of 2018 was $400.8 million, compared with $327.0 million at the end of the same quarter a year ago. 

Stock Repurchase 

In the second quarter of fiscal year 2018, the company repurchased a total of 595,770 shares for total consideration of approximately $29.9 million. Of the total shares repurchased in the quarter, 551,351 shares were purchased under the $75 million repurchase program that ended on June 30, 2017.  Ambarella repurchased a total of 1,119,178 shares from inception of the $75 million program for total cash consideration of approximately $56.7 million.  Under the new $50 million repurchase program that was announced in June 2017 and commenced on July 1st, the company repurchased a total of 44,419 ordinary shares in the second quarter for total cash consideration of approximately $2.2 million.  Purchases under this $50 million program may be made through June 30, 2018.

“During the second quarter, we had solid growth from IP security, both from professional and home monitoring camera markets.  We also continued to see growth in our OEM auto business, with strong design win activity and revenue from OEM auto video recorders,” said Fermi Wang, CEO of Ambarella.  “We continue to invest in the technologies required to deliver future generations of highly intelligent, HD and Ultra HD cameras with particular emphasis on high performance computer vision functionality.  We see computer vision as a key differentiator for us in camera markets, including automotive, IP security, drones and robotics, and it is our key area of focus for the future,” he said.

Quarterly Conference Call

Ambarella plans to hold a conference call at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time today with Fermi Wang, chief executive officer, Les Kohn, chief technical officer and George Laplante, chief financial officer, to discuss the second quarter fiscal year 2018 results and provide an update on the company’s computer vision technology. The call can be accessed by dialing 877-304-8963 in the USA; international callers should dial 760-666-4834, Participant passcode is “Ambarella.” Please dial in ten minutes prior to the scheduled conference call time. A live and archived webcast of the call will be available on Ambarella’s website at https://www.ambarella.com/ for up to 30 days after the call.

About Ambarella
Ambarella, Inc. (NASDAQ:AMBA), is a leading developer of low-power, high-definition (HD) and Ultra HD video compression and image processing solutions. The company’s products are used in a variety of HD cameras including security IP-cameras, sports cameras, wearable cameras, flying cameras and automotive video camera recorders. Ambarella compression chips are also used in broadcasting TV programs worldwide. For more information about Ambarella, please visit www.ambarella.com.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements that are not historical facts and often can be identified by terms such as “outlook,” “projected,” “intends,” “will,” “estimates,” “anticipates,” “expects,” “believes,” “could,” or similar expressions, including the guidance for the third quarter of fiscal year 2018 ending Oct. 31, 2017, and the comments of our CEO relating to growth of the company’s markets, design win activity, and the ability of the company to develop and commercialize new technologies, including computer vision functionality.  The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. Our actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of our future performance.

The risks and uncertainties referred to above include, but are not limited to, risks associated with revenue being generated from new customers or design wins, neither of which is assured; the commercial success of our customers’ products; our growth strategy; our ability to anticipate future market demands and future needs of our customers; our ability to introduce new and enhanced solutions; our ability to develop, and to generate revenue from, new advanced technologies, such as computer vision functionality; our ability to retain and expand customer relationships and to achieve design wins; the expansion of our current markets and our ability to successfully enter new markets; anticipated trends and challenges, including competition, in the markets in which we operate; our ability to effectively manage growth; our ability to retain key employees; and the potential for intellectual property disputes or other litigation.

Further information on these and other factors that could affect our financial results is included in the company’s Annual Report on Form 10-K for our 2017 fiscal year, which is on file with the Securities and Exchange Commission. Additional information will also be set forth in the company’s quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings the company makes with the Securities and Exchange Commission from time to time, copies of which may be obtained by visiting the Investor Relations portion of our web site at www.ambarella.com or the SEC’s web site at www.sec.gov.  Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to us on the date hereof.  The results we report in our quarterly report on Form 10-Q for the second quarter of fiscal year 2018 ended July 31, 2017 could differ from the preliminary results announced in this press release.

Ambarella assumes no obligation and does not intend to update the forward-looking statements made in this press release, except as required by law.

Non-GAAP Financial Measures

The company has provided in this release non-GAAP financial information including non-GAAP gross margin, net income, and earnings per share, as a supplement to the condensed consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”). Management uses these non-GAAP financial measures internally in analyzing the company’s financial results to assess operational performance and liquidity. The company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting and analyzing future periods. Further, the company believes these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics that the company uses in making operating decisions and because the company believes that investors and analysts use them to help assess the health of its business and for comparison to other companies. Non-GAAP results are presented for supplemental informational purposes only for understanding the company’s operating results. The non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP measures used by other companies.

With respect to its financial results for the second quarter of fiscal year 2018, the company has provided below reconciliations between its non-GAAP financial measures to its most directly comparable GAAP financial measures.  With respect to the company’s expectations for the third quarter of fiscal year 2018, a reconciliation of non-GAAP gross margin and non-GAAP operating expenses  guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges excluded from these non-GAAP measures.  We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

AMBARELLA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
		Three Months Ended July 31,						Six Months Ended July 31,
			2017			2016			2017			2016
Revenue		$	71,630		$	65,142		$	135,765		$	122,299
Cost of revenue			26,825			21,672			49,997			42,122
Gross profit			44,805			43,470			85,768			80,177
Operating expenses:
Research and development			27,538			23,643			54,140			48,109
Selling, general and administrative			11,962			10,565			23,706			21,458
Total operating expenses			39,500			34,208			77,846			69,567
Income from operations			5,305			9,262			7,922			10,610
Other income			224			171			377			198
Income before income taxes			5,529			9,433			8,299			10,808
Provision for income taxes			2,226			801			2,432			393
Net income		$	3,303		$	8,632		$	5,867		$	10,415
Net income per share attributable to ordinary shareholders:
Basic		$	0.10		$	0.27		$	0.18		$	0.32
Diluted		$	0.10		$	0.25		$	0.17		$	0.31
Weighted-average shares used to compute net income per share
attributable to ordinary shareholders:
Basic			33,227,717			32,557,398			33,240,767			32,492,723
Diluted			34,572,927			34,175,466			34,629,004			34,063,103

The following table presents details of stock-based compensation expense included in each functional line item in the condensed consolidated statements of operations above:

 

	Three Months Ended July 31,						Six Months Ended July 31,
		2017			2016			2017			2016
	(unaudited, in thousands)
Stock-based compensation:
Cost of revenue	$	332		$	246		$	635		$	491
Research and development		8,649			6,873			16,626			13,592
Selling, general and administrative		5,454			4,347			10,146			8,684
Total stock-based compensation	$	14,435		$	11,466		$	27,407		$	22,767

 

 

AMBARELLA, INC.
RECONCILIATION OF GAAP TO NON-GAAP DILUTED EARNINGS PER SHARE
(in thousands, except share and per share data)
	Three Months Ended July 31,								Six Months Ended July 31,
		2017				2016				2017				2016
	(unaudited)
GAAP net income	$	3,303			$	8,632			$	5,867			$	10,415
Non-GAAP adjustments:
Stock-based compensation expense		14,435				11,466				27,407				22,767
Income tax effect		(1,221	)			(1,592	)			(3,357	)			(3,238	)
Non-GAAP net income	$	16,517			$	18,506			$	29,917			$	29,944
GAAP – diluted weighted average shares		34,572,927				34,175,466				34,629,004				34,063,103
Non-GAAP – diluted weighted average shares		34,572,927				34,175,466				34,629,004				34,063,103
GAAP – diluted net income per share	$	0.10			$	0.25			$	0.17			$	0.31
Non-GAAP adjustments:
Stock-based compensation expense		0.42				0.34				0.79				0.67
Income tax effect		(0.04	)			(0.05	)			(0.10	)			(0.10	)
Non-GAAP – diluted net income per share	$	0.48			$	0.54			$	0.86			$	0.88

The difference between GAAP and non-GAAP gross margin was 0.4% and 0.4%, or
$332,000 and $246,000 for the three months ended July 31, 2017 and 2016, respectively. The difference between GAAP and non-GAAP gross margin was 0.4% and 0.4%, or $635,000 and $491,000 for the six months ended July 31, 2017 and 2016, respectively. The difference was due to the effect of stock-based compensation.

 

AMBARELLA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
	July 31,				January 31,
		2017				2017
ASSETS
Current assets:
Cash and cash equivalents	$	309,738			$	322,872
Marketable securities		91,077				82,522
Accounts receivable, net		38,351				38,596
Inventories		17,726				20,145
Restricted cash		9				8
Prepaid expenses and other current assets		2,810				4,392
Total current assets		459,711				468,535
Property and equipment, net		5,636				4,988
Deferred tax assets, non-current		6,299				5,774
Intangible assets, net		12,970				4,149
Goodwill		26,601				26,601
Other non-current assets		2,229				2,224
Total assets	$	513,446			$	512,271
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		23,466				19,955
Accrued and other current liabilities		19,906				26,448
Income taxes payable		2,014				568
Deferred revenue		6,203				7,425
Total current liabilities		51,589				54,396
Other long-term liabilities		9,131				3,241
Total liabilities		60,720				57,637
Shareholders’ equity:
Preference shares		—				—
Ordinary shares		15				15
Additional paid-in capital		204,513				212,276
Accumulated other comprehensive loss		(82	)			(70	)
Retained earnings		248,280				242,413
Total shareholders’ equity		452,726				454,634
Total liabilities and shareholders’ equity	$	513,446			$	512,271

Contacts:

Deborah Stapleton
650.815.1239 
deb@stapleton.com 

Source: Ambarella

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