Good day, ladies and gentlemen and welcome to your Ambarella’s Q1 Fiscal Year 2015 Earnings Call. At this time, all participants will be in a listen-only mode, but later, there will be a chance to ask questions and instructions will be given at that time. (Operator Instructions) And as a reminder, today’s conference is being recorded. And now, I would like to turn the program over to your host, Deborah Stapleton.

Good afternoon, and welcome to Ambarella’s first fiscal quarter 2015 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 information regarding our fiscal first quarter. The discussion today and the responses to your questions will contain forward-looking statements regarding our financial prospects, market growth, and demand for our solutions among other things. These statements 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 filed with the SEC, including the Annual Report on Form 10-K that we filed on April 4, 2014 for the 2014 fiscal year and the Form 10-Q for the first quarter of fiscal 2015 that will be filed shortly. Access to our first 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 will now turn the call over to Fermi Wang. Fermi?

Thank you, Deborah and good afternoon everyone. We are very pleased with our fiscal Q1 2015 financial results. Q1 revenue was $40.9 million, up 20.6% from the $33.9 million we reported in the first quarter a year ago. Q1 non-GAAP net income was $7.8 million, or $0.25 per diluted ordinary share. This compares with the non-GAAP net income of $6.2 million, or $0.21 per diluted ordinary share for the same period in fiscal 2014. I would like to discuss some of our products and market highlights. Then I will turn it over to George for more in-depth discussion of our first quarter financial performance and our guidance for Q2. The security market remained strong in Q1 with substantial sequential and year-over-year growth reflecting the steady development of customers added over the last 12 months as well as continued expansion of the global market. Ambarella has been very successful in penetrating professional security camera market across all geographies and across a wide range of product categories. This was evident during the ISC West 2014 International Security Exhibition and Exposition held in Las Vegas in April when many leading professional security customers introduced new products based on Ambarella solutions. This included the latest 4K or ultra-HD resolution cameras as well as panoramic cameras based on Ambarella’s new S2 camera SoC. During the show U.S. based FLIR, a leading supplier of thermal images and professional IP security cameras introduced and demonstrated 31 new models of camera based on Ambarella’s SoCs. First, professional security camera product line includes HD and up to 6 megapixel visible cameras as well as a full line of thermal security cameras. Additionally, Hikvision, one of the world’s largest leading surveillance and equipment suppliers introduced its new line of panoramic IP security cameras based on Ambarella’s S2 camera SoC. The…

Thank you, Fermi and good afternoon everyone. Today, I will discuss the financial highlights for the first quarter of fiscal year 2015 ending April 30, 2014. I will then review the financial outlook for Q2 of fiscal year 2015, which ends on July 31, 2014. During the call, I will discuss non-GAAP results and as such we will refer to today’s press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense as adjusted for income taxes. As we discussed in the past, the company has seasonality to both its revenue and gross margins. So, I will include year-on-year comparisons for certain key operating metrics to assist in the understanding of changes in our business. I will now start with a review of Q1 results. Our Q1 2015 revenues of $40.9 million represented an increase of 20.6% over the $33.9 million of revenue in the same period in the prior year. Camera market revenue is estimated at 90% of Q1 revenue compared to 86% for the same period in the prior year. Our professional and consumer IP security market was the principle driver of year-over-year revenue growth, ending the quarter as the largest camera segment based on both revenue and units. The growth in security both sequentially and year-over-year reflected the increase in revenues from customers added since Q1 of last year and the initial production shipments of our 4K IP security chip, the S2. Geographically, North America and Asia increased both sequentially and year-over-year while we saw a year-over-year increase in Europe at a sequential decline. As expected, Q1 revenues in our wearable sports camera market declined both sequentially and year-over-year. We mentioned in our Q4 2014 earnings calls that Q1 of last year was positively impacted by the launch…

Okay. (Operator Instructions) And we will take our first question from Cody Acree from Ascendiant Capital. Cody, please go ahead.

Yes, thank you very much guys and congrats on the results. I guess you specifically highlighted some of the competition in China, could you just spend a bit more time there and talk about your expectations for China growth and then what that competition might mean to your gross margins going forward?

Right. Probably in our previous call, where we are talking about HiSilicon in China has been our main competitors in China, many on the low end side and in fact in the last several months, as we start seeing the HiSilicon introducing new chip and being very aggressive on the pricing side. So, as we expected we have been exciting with this kind of move on lower competitors. And what we are trying to do is two-folds, first one is we continue to introducing new chip with the higher performance and higher features, so we can continue through providing the best solution on the mainstream high-end products and also we are prepared to competing with our low end competitors on the price side. So, by averaging all by providing higher end products, we believe we can continue to maintain our gross margin goal of 60% to 63% as corporate targeted market – targeted gross margin market and has then tied we will be aggressively competing with those competitors.

And on the lower end side risk with the more aggressive competition at the low end, you do think that with your price competitor parts that, that’s not going to be a margin dilution issue?

Well, I think right now on the low end side, we are using our A5S that want to continue using that chip to competing with them on that, but as I said, we just introduced a new product called S2L, which is going to be our mainstream product starting this second half this year and moving forward, so that we are going to have better products on the mainstream on low end side. A5 has been our mainstream chip for long time and we also continue to have a closed out plan with our suppliers. So, although we are – well maybe to compete on the – on low end side, but I think we will continue repeat that our corporate gross margin target is not changed.

And then George, you mentioned OpEx was a bit better than expected this quarter, can you talk about what your expectations for the rest of the year with those cost increases that you anticipate?

Yes. We have talked about quite a bit about moving into 14-nanometer during the year and we expect our OpEx to increase pretty consistently during the year from where we are in Q1. We had anticipated that to start earlier what due to wrapping up some of the other products and actually starting the 14-nanometer later in the quarter than originally anticipated we had some OpEx benefit, but you can anticipate for the rest of the year you will see quarterly increases.

Any magnitude help there?

Excuse me.

Any magnitude help on those increases?

Yes, we probably expect by year end to be somewhere $1.5 million to $2 million higher than we are currently on a quarterly basis. So we will ramp to that level.

Okay, great. And then lastly for me, a little different topic given the recent talk around Google buying Dropcam and the partnership that you of course announced last year, how is the relationship with Google and how might that acquisition if it comes to fruition impacted you positively or negatively?

Well, we have been working closely with Dropcam for a while since they introduced their first product. And we are expecting continue to maintain a strong relationship with Dropcam. But as you – just like you said we are also hearing these rumors, so maybe there is nothing we can comment on.

Is there any speculation on impact, is there any way that would not be a positive for you one way or the other neutral to positive?

We haven’t given any speculation on the impact. Every time we mentioned Google though something happens in the marketplace so.

Okay, guys. Thanks and congrats.

Thank you.

Thank you.

Thank you. And our next question comes from Ross Seymore from Deutsche Bank. So Ross, please go ahead.

Hi guys. George a question for you on the gross margin can you walk us through a little bit of the details on what’s driving it up this quarter, I know you talked about some product timing, but a little more color given the direction infrastructure is going, what’s happening within camera to get that up sequentially?

Yes, we are – we did mention the ramp of the S2 which is our high end chip in security which is ramping a little faster than we had originally forecasted. And so that’s a positive. We also are starting to ship the A9 version of that product. So we are getting a benefit of higher end of the marketplace in the quarter as well in Q2 as some of the softness in the low end which the security business which runs below of corporate margins some of that business is being offset by high end margin business.

And as we go into the second half of the year I know you are not guiding with any precision there, but with what Fermi said about some of the wearables the sports side coming back and I would assume some of the security side comes back is this mix that’s a positive driver in the July quarter something that you expect to reverse itself albeit within you corporate range.

We haven’t talked too much about that. Right at the moment, we would sit I guess I would repeat that our Q3 is normally our lower margin quarter just because of the consumer side of it. But I don’t think there would be any other major impact other than higher rate of consumer business in Q3. So I am comfortable with 60% to 63% and expectations are maybe Q3 being impacted a little bit by consumer.

Great. And I guess this is my last question one for you Fermi, I believe you said that you expected your IP security revenues to be flat sequentially, obviously off a very good ramp year-over-year, but can you go into a little bit of detail on what the competitive basis is, is this a digest in terms of growth, is it all pricing some socket loss any color on that front will be helpful? Thank you.

So I think those as you can see much – a lot of transition – conversion from analog to digital IP security camera not happens in China particularly. In fact we see a lot of analog camera being replaced by very low end IP security camera where that all competitors using a pricing to compete there. And also I think that’s where we are seeing our – the major competition. We haven’t seen any or do see market share on the major accounts but on the low end the replacing of a small aerial cameras that’s where the competition is strong.

And is that something that you expect to continue or like you said when you have the chip you will be able to fight back a little bit better in the back half of the year?

We are still participating, but I think we are never being trying to compete very aggressively on the price, but we definitely by the way with our customer who has a product line from very low end to a product high end. We also pull our key customers to continue competing in that space. But I do believe that all competitors the main competition criteria for that is using price competing in that particular market.

Okay, great. Thank you.

Thank you. And our next question comes from Quinn Bolton from Needham & Company. So Quinn, please go ahead Quinn Bolton - Needham & Company: Good afternoon guys. Congratulations on the results. Wanted to follow up on the low end of the security camera market, I was hoping you might be able to just give us some sense, what percentage of your overall security revenue, would you sort of categorize as low end China? I mean, how much of your business is affected by this competition from HiSilicon?

Well, let me start first, I think first of all, I think we only see HiSilicon competition in China for now. We haven’t seen in any other areas. And again, this is really at the very low end IP security camera replacing analog. So, I think this is definitely one area that going to continue grow, while other area will grow too, but I think this is where we see owing competition. And in the past, we were there and now we will work with our main customers, like we talk about Hikvision and Dahua in China to continue to serve their market.

Putting one other point is as you saw Q1 was heavily percentage wise was security business and you noticed our margins were fairly in line with our corporate margins, so I think the impact has been positive in Q2 and maybe slightly negative in Q1. You can see where our range is. Quinn Bolton - Needham & Company: Okay. And then proving on to the – sorry the sports camera business, I think you mentioned in your comments on the revenue outlook that there could be some volatility depending on timing of shipments of the A9 and I just wanted to clarify is that for sports cameras or was that the A9 version of the security camera solution?

It’s for all A9 and S2 products, it’s the same chip and it’s more than just sports. We use it across other markets also. Quinn Bolton - Needham & Company: So, when you say that sort of timing of A9, it’s both S2 as well as A9 for sports cameras, it’s kind of the double group, not any one market in particular?

That’s correct. And it’s even broader than those two markets that we used to have a guy in, yes. And it’s just that whether we can sell the backlog, the ramp of the backlog was a little bit higher than we had forecasted. Quinn Bolton - Needham & Company: Got it. And then just the last question and I know it’s been sort of it’s the softer outlook this year on the infrastructure business, can you give us any updates how you are progressing on solutions that would support the HEVC standard in the infrastructure business?

Yes. Like I said before, I think we continue to work on our HEVC solution. And I think in the near future, we will announce our HEVC solution for the broadcasting. Quinn Bolton - Needham & Company: Great, thank you very much.

Thank you. And our next question comes from Suji De Silva from Topeka. Suji, please go ahead.

Hi, guys. Nice job on the quarter. Can you talk about in fiscal second quarter, I think George, you guided autos and wearables both up sequentially, which one do you expect stronger contribution from or are they fairly similar?

We always would expect wearable sports cameras to be a bigger contribution than automotive at this point. Wearable sports cameras is the second largest of the camera segments.

I guess, I mean, in terms of sequential growth versus dollars, George?

Yes. I would still say it’s going to be wearable sports cameras.

Okay, great. And then for fiscal ‘15 the full year, which do you think has been broken out of the professional IP security market or the prosumer one or are they both going to be a similar clip?

Well, what we have talked about in the past is the consumer market is really we are anticipating to be a second half engine, growth engine for us. So, obviously, the professional would be a growth engine for the entire year. And it’s significantly bigger than we would anticipate the consumer side of the business this year.

And maybe lastly on the Google Helpout, can you just help us understand when and if that has a revenue impact and timing of that? Thanks.

Well, like we said before, we don’t expect any revenue from wearable market until next year. And I think that’s continued to be the case.

Okay, great. Thanks guys. Nice job in the quarter.

Thank you.

Thank you. And our next question comes from Jay Srivatsa from Chardan Capital Markets.

Thanks for taking my question. Fermi, on going back to HiSilicon, it appears they are clearly making a push with some of the high definition products to move upstream, are you concerned as you look to the rest of the year and into 2015 that some of that’s – some of their competition might address to the mid end and possibly to the high end and what are the means for Ambarella going forward?

Well, in fact we are always being very careful about how our competition positioned their products. There are new products that are introduced are still in terms of spec and performance they are lower than our mainstream products especially lower than the S2L we introduced. So with S2L that we introduced earlier this year, I think we very well established our self continued to be the key supplier for the mainstream and the high end in there. So I think to answer your question, yes we will be very careful to reveal our competition, but so far we are still confident from the mainstream side it should be okay.

Okay. And then on to the wearables part, I mean everybody is seeing GoPro numbers it looks like Q1 was sequentially down from the previous years, but your guidance appears to suggest that the new products are going to be ramping up in the second quarter, what is your view on wearables beyond just the new product in Q2 as you look to the rest of the year?

Well, I think what we said is we expect that because our selling season in Christmas time we do expect that our wearable sports camera will have a growth over Q1. I think that’s what we said in our guidance and we believe that wearable sports camera Q1 was low because compared to last Q1 is because last Q1 was strong, so as we expected. And this year we just expected that wearable sports camera to have a typical product cycle and the seasonality of the year.

Okay. And then last question on the infrastructure business, I think George you mentioned that there were some delays in the upgrades cycle of the service providers what is your sense in terms of timing of when do you expect that to come back?

Alright. So I think in the last conference call we told about 18 months. I think that we still stand to that expectation. I think it will still take at least another year for the service providers to upgrade into HVEC in a meaningful scale.

Okay. Thank you.

Thank you. And our next question comes from Kevin Cassidy from Stifel. Kevin, please go ahead.

Yes. Thanks for taking my call and congratulations on the quarter. For the 14 nanometer you said there is a slight delay, could you give us more information on that and is there a delay in introducing the product maybe we can when you expect to ship 14-nanometer products for volume?

Well, I think it was maybe related to internal process you might – first of all ripe out the previous project properly and also try to design our first 14 nanometer product carefully and making sure that we meet our customer’s target. As you can see that 14 nanometer is very costly to us. So we are being extra careful in terms of designing the spec. And I think that caused a delay a little bit but I do expect that George said should we expect that we are going to ramp up 14 nanometer expense very quickly.

Okay. And so would that be in the second half of 2015 or first half of 2015?

Well, we will start. We are already starting the work Kevin and you will just see it start to ramp up hopefully smoothly for the rest of the year and into next year. So I don’t think other than some shortfall in dollar spent in Q1 the rest of the quarters will really change much from what most of the analysts have projected.

Okay. And maybe just along those lines of 14-nanometer, do you see any of your competitors moving towards 14 nanometer, how much of a lead do you think you have on the market?

Well, the latest HiSilicon solution we estimate there are 55 nanometer. So I think there is still a huge gap there. So I don’t see them come to a 14 nanometer for their security camera anytime soon. And I don’t see TI introducing any new product recently. So, there is no other major competitors that we are aware of trying to tape out to the 14-nanometer competing with those in our market.

Our S2L chip was actually in 28-nanometer. So, we have got our significant lead on the current products in the marketplace.

Great, that’s it. Congratulations again.

Thank you.

Thank you. And our next question comes from Charlie Anderson from Dougherty & Company. So, Charlie, please go ahead. Charlie Anderson - Dougherty & Company: Yes, thanks for taking my questions and congrats on the strong results again. Fermi, I wondered if you could maybe give us a little bit of commentary on some of the language we saw in the GoPro S1 around devoting R&D dollars to quote image silicon processors. If that was something that was complementary and on top of you or if it’s something where you think they are trying to maybe insource some of the algorithms? Any comments on that would be helpful.

I think first of all we are – we work closely with our partners on the development of the products. And over SoC hardware platform, the IP and ownership belongs to Ambarella. However, like we said before, we do provide a development platform, a very programmable development platform to our key partners, so they can write software to enable differentiated features on the product line. That’s why we work closely with the GoPro and I think they approve using that platform to developing features that only GoPro has. I think that’s why they are referring to that. That’s my guess what they are referring to. Charlie Anderson - Dougherty & Company: Got it. And then not to beat a dead horse on the HiSilicon issue, but I wondered if you could just help us with maybe the mix in that IP security business between maybe the low-end China ODMs, who maybe aren’t as discerning on price versus sort of the high ends where it’s really more about the features? Just to help us understand what portion is – where you are facing this pressure?

Well, the highest volume portion of it is in the mid range. This is where our strength is. And actually, a lot of our growth is at the high end. So, at the low end, there is growth there both in the consumer side as well as the professional side, but it’s still a minority portion of our business. Charlie Anderson - Dougherty & Company: Got it. Thanks so much.

Okay, thank you. That does conclude our Q&A for today. I’d like to turn the call back for concluding remarks.

Thank you and thanks for joining us today. And a special thanks to all of our employees for their continued dedication and hard work and goodbye for now. Thank you.

Okay. Ladies and gentlemen, this does conclude your conference. You may now disconnect and have a great day.