AMBARELLA INC
For the period ended Oct 31, 2024. Filed Dec 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 31, 2024 · Filed Dec 6, 2024
AMBA$58.55+6.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-31; filed 2024-09-04.
0000950170-24-103199
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-31; filed 2024-12-06.
0000950170-24-134023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 83 current paragraphs.
59 unchanged; 20 reworded; 4 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Revenue increased for the three and nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to higher product unit shipments driven by customers' new product ramps, an increased percentage of our sales from higher value AI inference processors which contribute to a higher average selling price, as well as higher nonrecurring engineering (NRE) project service revenue. For the nine months ended October 31, 2024, the increased revenue was partially offset by lower video processor product unit shipments.
Current report
Provision (Benefit) for Income Taxes
Current report
Commitments
Current report
During fiscal year 2025, we entered into a noncancellable service contract with a third-party for our IT infrastructure service and committed to purchase a noncancelable on-premise internal-use software license for product design. As of October 31, 2024, the estimated future undiscounted cash payments for the commitments were approximately $8.0 million and are expected to be paid between twelve months to sixty-one months from October 31, 2024.
Removed paragraphs (4)
Previous report
Revenue increased for the three months ended July 31, 2024, as compared to the same period in the prior fiscal year, primarily due to higher product unit shipments, continued adoption of our CV-based solutions which have higher average selling prices than non-CV solutions, as well as higher NRE project service revenue. Revenue decreased for the six months ended July 31, 2024, as compared to the same period in the prior fiscal year, primarily due to lower product unit shipments in the first quarter of fiscal year 2025, partially offset by continued adoption of our CV-based solutions with higher average selling prices and higher NRE project service revenue.
Previous report
Provision for Income Taxes
Previous report
Contract Service Commitment
Previous report
In the second quarter of fiscal year 2025, we also entered into a noncancellable service contract with a third party provider for 64 months, starting from August 2024 through November 2029. The noncancellable service supports our IT infrastructure and the total estimated cash payment is approximately $5.2 million.
Reworded paragraphs (20)
Previous wording
We recorded revenue of $63.7 million and $118.2 million for the three and six months ended July 31, 2024, respectively. This represented an increase of 2.6% and a decrease of 4.9%, respectively, as compared to the same periods in the prior fiscal year. The increase in revenue for the three months ended July 31, 2024 was primarily attributable to higher product unit shipments, continued adoption of our CV-based solutions which have higher average selling prices than non-CV solutions, as well as higher nonrecurring engineering (NRE) project service revenue. The decrease in revenue for the six months ended July 31, 2024 was primarily attributable to lower product unit shipments in the first quarter of fiscal year 2025, partially offset by continued adoption of our CV-based solutions with higher average selling prices and higher NRE project service revenue.
Current wording
We recorded revenue of $82.7 million and $200.9 million for the three and nine months ended October 31, 2024, respectively. This represented an increase of 63.4% and 14.9%, respectively, as compared to the same periods in the prior fiscal year. The increases in revenue were primarily attributable to higher product unit shipments driven by customers' new product ramps, an increased percentage of our sales from higher value AI inference processors which contribute to a higher average selling price, as well as higher nonrecurring engineering (NRE) project service revenue. For the nine months ended October 31, 2024, the increased revenue was partially offset by lower video processor product unit shipments.
Previous wording
We recorded operating losses of $36.3 million and $75.7 million for the three and six months ended July 31, 2024, respectively, as compared to operating losses of $35.3 million and $70.9 million for the three and six months ended July 31, 2023, respectively. The higher operating losses were primarily attributable to higher engineering-related expenses associated with the progress and number of chips in development. For the six months ended July 31, 2024, the higher operating loss was also attributable to lower revenue and gross profit, partially offset by lower personnel cost associated with lower headcount.
Current wording
We recorded operating losses of $25.5 million and $101.2 million for the three and nine months ended October 31, 2024, respectively, as compared to operating losses of $42.0 million and $112.8 million for the three and nine months ended October 31, 2023, respectively. The reduced operating losses were primarily attributable to higher revenue and improved gross margin, partially offset by increased operating expenses. The increased operating expenses primarily related to higher engineering-related expenses associated with the development progress and an increase in number of chips in development.
Previous wording
We generated cash flows from operating activities of $1.8 million for the six months ended July 31, 2024, as compared to $15.2 million for the six months ended July 31, 2023. The lower cash flows from operating activities were primarily attributable to lower cash flow from changes in working capital, including payments for chip development costs and a higher net loss, adjusted for certain non-cash items.
Current wording
We generated cash flows from operating activities of $8.4 million for the nine months ended October 31, 2024, as compared to $23.1 million for the nine months ended October 31, 2023. The lower cash flows from operating activities were primarily attributable to lower net cash flow from working capital, including lower collections of accounts receivable associated with the timing of sales and increased inventory purchases based on expected future demand from customers, partially offset by reduced net loss adjusted for certain non-cash items.
Previous wording
The end markets into which we sell our products have seen significant changes as consumer preferences have evolved in response to new technologies. As a result, the composition and timing of our revenue may differ meaningfully during periods of technology or consumer preference changes. We expect shifts in consumer use of video capture to continue to change over time, as AI and computer vision specialized use cases emerge and video capture continues to proliferate.
Current wording
The end markets into which we sell our products have seen significant changes as consumer preferences have evolved in response to new technologies. As a result, the composition and timing of our revenue may change in future periods. We expect shifts in consumer use of video capture to continue to change over time, as AI and computer vision specialized use cases emerge and video capture continues to proliferate.
Previous wording
Research and development expense consists primarily of personnel costs, including salaries, stock-based compensation and employee benefits. The expense also includes costs of development incurred in connection with our collaborations with our foundry vendors, costs of licensing intellectual property from third parties for product development, costs of development for software and hardware tools, costs of fabrication of mask sets for prototype products, the cost and depreciation of equipment, outside services as well as allocated depreciation and facility expenses. All research and development costs are expensed as incurred. We expect our research and development expense to generally increase in absolute dollars as we continue to enhance and expand our product features and offerings and increase headcount for new SoC development and development of computer vision technology.
Current wording
Research and development expense primarily consists of personnel costs, including salaries, stock-based compensation and employee benefits. The expense also includes costs of development incurred in connection with our collaborations with our foundry vendors, costs of licensing intellectual property from third parties for product development, costs of development for software and hardware tools, costs of fabrication of mask sets for prototype products, the cost and depreciation of equipment, outside services as well as allocated depreciation and facility expenses. All research and development costs are expensed as incurred. We expect our research and development expense to generally increase in absolute dollars as we continue to enhance and expand our product features and offerings and increase headcount for new SoC development and development of computer vision technology.
Previous wording
Selling, general and administrative expense consists primarily of personnel costs, including salaries, stock-based compensation and employee benefits for our sales, marketing, finance, human resources, information technology and administrative personnel. The expense also includes amortization of trade name and customer relationships, professional service costs related to accounting, tax, legal services, and allocated depreciation and facility expenses.
Current wording
Selling, general and administrative expense primarily consists of personnel costs, including salaries, stock-based compensation and employee benefits for our sales, marketing, finance, human resources, information technology and administrative personnel. The expense also includes amortization of trade name and customer relationships, professional service costs related to accounting, tax, legal services, and allocated depreciation and facility expenses.
Previous wording
Other income, net, consists primarily of interest income and yields from our cash deposits and debt security investments, realized gains and losses from equity and debt security investments, subsidies granted by foreign governments, as well as gains and losses from foreign currency transactions and remeasurements.
Current wording
Other income, net, primarily consists of interest income and yields from our cash deposits and debt security investments, realized gains and losses from equity and debt security investments, subsidies granted by foreign governments, as well as gains and losses from foreign currency transactions and remeasurements.
Previous wording
Comparison of the Three and Six Months Ended July 31, 2024 and 2023
Current wording
Comparison of the Three and Nine Months Ended October 31, 2024 and 2023
Previous wording
Gross margin decreased for the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to higher manufacturing costs associated with advanced process technologies, partially offset by lower inventory reserves and higher sales of inventory that was previously reserved.
Current wording
Gross margin increased for the three and nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to favorable product mix, increased higher margin NRE project service revenue, as well as lower net inventory reserve. For the nine months ended October 31, 2024, the gross margin was also positively impacted by higher sales of inventory that was previously reserved. The increased gross margin for the three and nine months ended October 31, 2024 were partially offset by higher manufacturing costs associated with advanced process technologies.
Previous wording
Research and development expense increased for the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to approximately $1.6 million and $2.1 million, respectively, of additional engineering-related expenses associated with the progress and number of chips in development. For the six months ended July 31, 2024, the increase was partially offset by approximately $0.6 million lower personnel costs, including stock-based compensation, as a result of lower headcount.
Current wording
Research and development expense increased for the three and nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to approximately $2.9 million and $5.0 million, respectively, of additional engineering-related expenses associated with the development progress and an increase in number of chips in development. Personnel costs for the three and nine months ended October 31, 2024 increased by approximately $1.7 million and $1.1 million, respectively, as a result of higher headcount in support of our AI technology development activities.
Previous wording
Selling, general and administrative expense decreased for the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to lower personnel costs and facility-related expenses of approximately $0.4 million and $1.0 million, respectively.
Current wording
Selling, general and administrative expense decreased for the three and nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to lower personnel costs of approximately $1.0 million and $1.9 million, respectively, as a result of lower headcount.
Previous wording
The increases in other income, net, for the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, were primarily due to an approximately $1.2 million impairment charge relating to an equity investment recognized during the second quarter of fiscal year 2024 that did not recur in the current fiscal year, as well as approximately $0.2 million and $1.2 million, respectively, of additional interest income and yields from our cash deposits and debt security investments.
Current wording
The increase in other income, net, for the three months ended October 31, 2024, as compared to the same period in the prior fiscal year, was primarily due to an approximately $0.2 million subsidy received from a foreign government. The increase in other income, net, for the nine months ended October 31, 2024, as compared to the same period in the prior fiscal year, was primarily due to an approximately $1.2 million impairment charge relating to an equity investment recognized in the second quarter of fiscal year 2024 that did not recur in the current fiscal year, as well as approximately $1.1 million of additional interest income and yields from our cash deposits and debt security investments and $0.4 million net gains from foreign currency transactions and remeasurements.
Previous wording
The increases in income tax expense for the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, were primarily due to tax benefit from the release of $3.6 million of valuation allowance on the deferred tax assets of Oculii Corp, or Oculii, in the prior fiscal year that did not recur in the current fiscal year.
Current wording
The decrease in income tax expense for the three months ended October 31, 2024, as compared to the same period in the prior fiscal year, was primarily due to a decrease in the proportion of profits generated in higher tax jurisdictions. The increase in income tax expense for the nine months ended October 31, 2024, as compared to the same period in the prior fiscal year, was primarily due to tax benefit from the release of $3.6 million of valuation allowance on the deferred tax assets of Oculii Corp, or Oculii, in the prior fiscal year that did not recur in the current fiscal year.
Previous wording
As of July 31, 2024, we had cash, cash equivalents and marketable debt securities of approximately $219.8 million. We invest in highly-liquid, short-term marketable debt securities and hold these investments as available-for-sale securities. Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information. The current inflationary environment in the United States and resulting high interest rates have not had a material impact on our investment portfolio and financial position.
Current wording
As of October 31, 2024, we had cash, cash equivalents and marketable debt securities of approximately $226.5 million. We invest in highly-liquid, short-term marketable debt securities and hold these investments as available-for-sale securities. Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information. The current inflationary environment in the United States and resulting higher interest rates have not had a material impact on our investment portfolio and financial position.
Previous wording
Net cash provided by operating activities decreased for the six months ended July 31, 2024, as compared to the same period in the prior fiscal year, primarily due to lower cash flow from changes in working capital, including higher payments for chip development costs and a higher net loss, adjusted for certain non-cash items.
Current wording
Net cash provided by operating activities decreased for the nine months ended October 31, 2024, as compared to the same period in the prior fiscal year, primarily due to lower net cash flow from working capital, including lower collections of accounts receivable associated with the timing of sales and increased inventory purchases based on expected future demand from customers, partially offset by reduced net loss adjusted for certain non-cash items.
Previous wording
Net cash provided by investing activities increased for the six months ended July 31, 2024, as compared to the same period in the prior fiscal year, primarily due to approximately $9.7 million of net cash receipts from our debt security investments, and $4.0 million less in payments for the purchase of capital assets and licenses.
Current wording
Net cash used in investing activities increased for the nine months ended October 31, 2024, as compared to the same period in the prior fiscal year, primarily due to approximately $39.0 million of additional net cash payments for our marketable debt security investments, partially offset by $3.9 million less in payments for the purchase of capital assets and licenses.
Previous wording
Net cash provided by financing activities decreased for the six months ended July 31, 2024, as compared to the same period in the prior fiscal year, primarily due to approximately $1.1 million additional principal payments associated with long-term software license agreements, partially offset by approximately $0.8 million higher cash receipt from stock activities.
Current wording
Net cash provided by financing activities increased for the nine months ended October 31, 2024, as compared to the same period in the prior fiscal year, primarily due to approximately $2.7 million higher cash receipts from stock activities, partially offset by approximately $1.0 million higher principal payments associated with long-term software license agreements.
Previous wording
On May 29, 2024, our Board of Directors approved an extension of our existing share repurchase program for an additional twelve months through June 30, 2025. The repurchase program does not obligate us to acquire any particular amount of ordinary shares, and it may be suspended at any time at our discretion. No ordinary shares were repurchased during the six months ended July 31, 2024. As of July 31, 2024, there was approximately $49.0 million remaining available for repurchases under the current repurchase program through June 30, 2025.
Current wording
On May 29, 2024, our Board of Directors approved an extension of our existing share repurchase program for an additional twelve months through June 30, 2025. The repurchase program does not obligate us to acquire any particular amount of ordinary shares, and it may be suspended at any time at our discretion. No ordinary shares were repurchased during the nine months ended October 31, 2024. As of October 31, 2024, there was approximately $49.0 million remaining available for repurchases under the current repurchase program through June 30, 2025.
Previous wording
As of July 31, 2024, we had purchase obligations with our independent contract manufacturers of $57.5 million.
Current wording
As of October 31, 2024, we had purchase obligations with our independent contract manufacturers of $51.4 million.
Previous wording
In the second quarter of fiscal year 2025, we extended our Shanghai, Shenzhen and Italy office leases for an additional 36 months, 28 months and 22 months, respectively, with the earliest such extension commencing in July 2024 and the latest end date in November 2027. The corresponding operating right-of-use assets and related lease liabilities have been recorded in the condensed consolidated balance sheets as of July 31, 2024. The total estimated future undiscounted cash payments for the extensions are approximately $3.5 million. Refer to Note 7 Leases of Notes to Condensed Consolidated Financial Statements for details of these extended leases.
Current wording
In the second quarter of fiscal year 2025, we extended our Shanghai, Shenzhen and Italy office leases for an additional 36 months, 28 months and 22 months, respectively, with the earliest such extension commencing in July 2024 and the latest end date in November 2027. In the third quarter of fiscal year 2025, we also extended a facility lease in Santa Clara, California for an additional 24 months beginning from October 2024 to September 2026. The corresponding operating right-of-use assets and related lease liabilities have been recorded in the condensed consolidated balance sheets as of October 31, 2024. As of October 31, 2024, the total estimated future undiscounted cash payments for the extensions are approximately $3.6 million. Refer to Note 7 Leases of Notes to Condensed Consolidated Financial Statements for details of these extended leases.