Ambarella(US:AMBA)2024-06-06 18:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ambarella's unaudited condensed consolidated financial statements for the quarter ended April 30, 2024, show total assets decreased to $638.7 million and net loss increased to $37.9 million Condensed Consolidated Balance Sheets As of April 30, 2024, total assets decreased to $638.7 million from $657.7 million, primarily due to reduced cash and marketable securities, while total liabilities also decreased to $83.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 30, 2024 | January 31, 2024 | | :--- | :--- | :--- | | Total current assets | $266,907 | $280,157 | | Cash and cash equivalents | $131,810 | $144,914 | | Total assets | $638,660 | $657,655 | | Total current liabilities | $72,245 | $82,979 | | Accounts payable | $16,470 | $28,503 | | Total liabilities | $83,235 | $97,784 | | Total shareholders' equity | $555,425 | $559,871 | Condensed Consolidated Statements of Operations For the three months ended April 30, 2024, revenue decreased by 12.3% to $54.5 million, resulting in a wider net loss of $37.9 million or ($0.93) per share Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | | :--- | :--- | :--- | | Revenue | $54,473 | $62,142 | | Gross Profit | $33,160 | $37,519 | | Loss from Operations | $(39,445) | $(35,542) | | Net Loss | $(37,932) | $(35,902) | | Diluted Net Loss Per Share | $(0.93) | $(0.91) | Condensed Consolidated Statements of Cash Flows Net cash outflow from operating activities was $15.0 million for the three months ended April 30, 2024, a reversal from the prior year's inflow, primarily due to a higher net loss and working capital changes Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(14,951) | $22,025 | | Net cash provided by (used in) investing activities | $2,135 | $(8,210) | | Net cash (used in) provided by financing activities | $(288) | $385 | | Net (decrease) increase in cash | $(13,104) | $14,200 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, financial instruments, and segment reporting, highlighting high revenue concentration with WT Microelectronics and Chicony accounting for 62% and 13% of revenue respectively - The company operates in a single reporting segment focused on the development and sales of low-power, HD, Ultra HD video compression, image processing, and AI computer vision solutions94 - Revenue concentration remains high. For the three months ended April 30, 2024, distributor WT Microelectronics accounted for 62% of revenue and ODM Chicony accounted for 13%97 - On May 29, 2024, the Board of Directors approved a twelve-month extension of the existing share repurchase program through June 30, 2025, with approximately $49.0 million available for repurchases98 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses a 12.3% year-over-year revenue decrease to $54.5 million and a widened operating loss, emphasizing strategic focus on AI and computer vision for future growth Overview Ambarella focuses on developing low-power SoCs with its CVflow™ architecture for AI processing in edge devices, targeting future growth in IoT, automotive ADAS, industrial, and robotics markets - The company's strategic focus is on advanced AI technology, specifically its CVflow™ architecture, to enable edge devices to visually perceive their environment and make decisions102 - Future revenue growth is expected to depend significantly on expanding within camera markets with computer vision technology, particularly in the Internet of Things (IoT), automotive ADAS, industrial, and robotics markets103 Results of Operations Operational results show a 12.3% YoY revenue decrease to $54.5 million despite a slight gross margin increase to 60.9%, leading to an increased operating loss Revenue Comparison (in thousands) | Period | Revenue | Change Amount | Change % | | :--- | :--- | :--- | :--- | | Q1 FY2025 | $54,473 | $(7,669) | (12.3)% | | Q1 FY2024 | $62,142 | | | - Gross margin increased slightly to 60.9% from 60.4% YoY, primarily due to sales of inventory that was previously reserved and lower adverse purchase commitments130 - R&D expense decreased by 0.6% YoY to $54.1 million, and SG&A expense decreased by 0.8% YoY to $18.5 million, both primarily due to lower personnel costs131132 Liquidity and Capital Resources As of April 30, 2024, the company held $203.3 million in cash and marketable securities, with a $15.0 million net cash outflow from operations, but believes existing cash is sufficient for the next 12 months - The company had cash, cash equivalents, and marketable debt securities of approximately $203.3 million as of April 30, 2024136 - Net cash used in operating activities was $15.0 million, a significant decrease from the $22.0 million provided by operating activities in the same period last year, primarily due to reductions in working capital and a higher net loss138139 - The share repurchase program was extended through June 30, 2025, with $49.0 million available. No shares were repurchased in the quarter142 Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures since its Annual Report on Form 10-K for the fiscal year ended January 31, 2024 - There have been no material changes to the market risk as described in the company's 2024 Form 10-K148 Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of April 30, 2024, due to a previously identified material weakness in accounting for income taxes, for which remediation is ongoing - Management concluded that disclosure controls and procedures were not effective as of April 30, 2024, due to a previously identified material weakness150 - The material weakness relates to the company not designing and maintaining effective controls over the accounting for income taxes, specifically a lack of tax personnel with the appropriate skills and experience to assess complicated tax matters151 - A remediation plan is underway, which includes implementing enhancements to existing control activities, improving documentation standards, and increasing technical oversight and training152 PART II. OTHER INFORMATION Legal Proceedings The company reports that it is not engaged in any material legal proceedings at this time - The company is not currently engaged in any material legal proceedings155 Risk Factors This section details numerous risks including dependence on customer design wins, failure to penetrate new markets, intense competition, supply chain issues, customer concentration, and the previously disclosed material weakness in internal controls - Business Risk: Success is highly dependent on customers designing Ambarella's solutions into their products and the commercial success of those end products159160161 - Market Risk: Failure to penetrate new markets, such as automotive OEM and ADAS, or if target markets like AI and computer vision do not grow as expected, could harm revenue162173174 - Supply Chain & Customer Concentration Risk: The company relies on a limited number of customers (WT and Chicony accounted for 62% and 13% of revenue, respectively) and third-party manufacturers, and is subject to supply chain disruptions and inventory forecasting challenges178179236 - Internal Control Risk: A material weakness was identified in internal control over financial reporting as of January 31, 2024, related to the accounting for income taxes, which could result in a material misstatement in financial statements if not remediated279280 Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended April 30, 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading plan during the quarter ended April 30, 2024320 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and Inline XBRL documents - This section lists the exhibits filed as part of the Quarterly Report, including officer certifications required under the Sarbanes-Oxley Act and Inline XBRL data files321322