AMBARELLA INC [AMBA] Filings

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10-Q 1 amba-10q_20220430.htm 10-Q amba-10q_20220430.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35667

AMBARELLA, INC.

(Exact name of registrant as specified in its charter)

Cayman Islands		98-0459628
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3101 Jay Street Santa Clara, California		95054
(Address of principal executive offices)		(Zip Code)

(408) 734-8888

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary Shares, $0.00045 Par Value Per Share	AMBA	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of ordinary shares of the Registrant outstanding as of June 1, 2022 was 38,120,104 shares.

AMBARELLA, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION			3

Item 1.	Financial Statements		3

	Unaudited Condensed Consolidated Balance Sheets at April 30, 2022 and January 31, 2022		3

	Unaudited Condensed Consolidated Statements of Operations for the three months ended April 30, 2022 and 2021		4

	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended April 30, 2022 and 2021		5

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended April 30, 2022 and 2021		6

	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2022 and 2021		7

	Notes to Unaudited Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27

Item 4.	Controls and Procedures		27

PART II. OTHER INFORMATION			27

Item 1.	Legal Proceedings		27

Item 1A.	Risk Factors		28

Item 6.	Exhibits		55

Signatures			57

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

AMBARELLA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

	As of
	April 30,		January 31,
	2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	200,639	$	171,043
Accounts receivable, net		28,008		44,307
Inventories		41,523		45,219
Restricted cash		10		10
Prepaid expenses and other current assets		8,149		6,169
Total current assets		278,329		266,748
Property and equipment, net		10,138		10,134
Deferred tax assets, non-current		13,970		15,340
Intangible assets, net		48,477		46,302
Operating lease right-of-use assets, net		10,292		11,127
Goodwill		303,625		303,625
Other non-current assets		3,834		4,269
Total assets	$	668,665	$	657,545
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		29,763		31,170
Accrued and other current liabilities		39,354		52,064
Operating lease liabilities, current		3,293		3,391
Income taxes payable		1,481		1,245
Deferred revenue, current		964		1,414
Total current liabilities		74,855		89,284
Operating lease liabilities, non-current		7,438		8,322
Other long-term liabilities		12,024		12,763
Total liabilities		94,317		110,369
Commitments and contingencies (Note 12)
Shareholders' equity:
Preference shares, $0.00045 par value per share, 20,000,000 shares authorized and no shares issued and outstanding at April 30, 2022 and January 31, 2022, respectively		—		—
Ordinary shares, $0.00045 par value per share, 200,000,000 shares authorized at April 30, 2022 and January 31, 2022, respectively; 38,082,879 shares issued and outstanding at April 30, 2022; 37,302,818 shares issued and outstanding at January 31, 2022		17		17
Additional paid-in capital		485,281		447,287
Retained earnings		89,050		99,872
Total shareholders’ equity		574,348		547,176
Total liabilities and shareholders' equity	$	668,665	$	657,545

See accompanying notes to condensed consolidated financial statements.

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended April 30,
	2022			2021
Revenue	$	90,305		$	70,133
Cost of revenue		33,758			26,368
Gross profit		56,547			43,765
Operating expenses:
Research and development		46,690			37,874
Selling, general and administrative		20,355			16,027
Total operating expenses		67,045			53,901
Loss from operations		(10,498	)		(10,136	)
Other income, net		86			593
Loss before income taxes		(10,412	)		(9,543	)
Provision for income taxes		410			1,275
Net loss	$	(10,822	)	$	(10,818	)
Net loss per share attributable to ordinary shareholders:
Basic	$	(0.29	)	$	(0.30	)
Diluted	$	(0.29	)	$	(0.30	)
Weighted-average shares used to compute net loss per share attributable to ordinary shareholders:
Basic		37,715,338			35,940,304
Diluted		37,715,338			35,940,304

See accompanying notes to condensed consolidated financial statements.

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in thousands)

	Three Months Ended April 30,
	2022			2021
Net loss	$	(10,822	)	$	(10,818	)
Other comprehensive loss, net of tax:
Net unrealized losses on investments		—			(427	)
Other comprehensive loss, net of tax		—			(427	)
Comprehensive loss	$	(10,822	)	$	(11,245	)

See accompanying notes to condensed consolidated financial statements.

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

							Accumulated
	Outstanding				Additional		Other
	Ordinary Shares				Paid-in		Comprehensive			Retained
	Shares		Amount		Capital		Income			Earnings			Total
Balance--January 31, 2022		37,302,818	$	17	$	447,287	$	—		$	99,872		$	547,176
Issuance of shares through employee equity plans		736,516		—		8,589		—			—			8,589
Issuance of shares through employee stock purchase plan		43,545		—		3,250		—			—			3,250
Stock-based compensation expense		—		—		26,155		—			—			26,155
Net loss		—		—		—		—			(10,822	)		(10,822	)
Balance--April 30, 2022		38,082,879	$	17	$	485,281	$	—		$	89,050		$	574,348

							Accumulated
	Outstanding				Additional		Other
	Ordinary Shares				Paid-in		Comprehensive			Retained
	Shares		Amount		Capital		Income			Earnings			Total
Balance--January 31, 2021		35,547,440	$	16	$	347,458	$	1,219		$	126,283		$	474,976
Issuance of shares through employee equity plans		643,120		—		6,741		—			—			6,741
Issuance of shares through employee stock purchase plan		82,783		—		3,694		—			—			3,694
Stock-based compensation expense		—		—		17,128		—			—			17,128
Net unrealized losses on investments - net of tax		—		—		—		(427	)		—			(427	)
Net loss		—		—		—		—			(10,818	)		(10,818	)
Balance--April 30, 2021		36,273,343	$	16	$	375,021	$	792		$	115,465		$	491,294

See accompanying notes to condensed consolidated financial statements.

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Three Months Ended April 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(10,822	)	$	(10,818	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		4,608			2,883
Amortization (accretion) of premium (discount) on marketable debt securities, net		—			417
Stock-based compensation		27,041			18,842
Deferred income taxes		1,370			433
Other non-cash items, net		32			(190	)
Changes in operating assets and liabilities:
Accounts receivable		16,299			(9,554	)
Inventories		3,696			(7,039	)
Prepaid expenses and other current assets		(2,731	)		161
Other non-current assets		435			(65	)
Accounts payable		(2,865	)		(480	)
Accrued and other current liabilities		(2,515	)		1,969
Income taxes payable		236			(262	)
Deferred revenue		(450	)		(74	)
Operating lease liabilities		(1,069	)		(856	)
Other long-term liabilities		295			86
Net cash provided by (used in) operating activities		33,560			(4,547	)
Cash flows from investing activities:
Purchase of investments		—			(57,117	)
Escrow claim associated with business acquisition		749			—
Sales of investments		—			18,609
Maturities of investments		—			29,232
Purchase of tangible and intangible assets		(4,701	)		(1,954	)
Net cash used in investing activities		(3,952	)		(11,230	)
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan		1,876			3,893
Payment for intangible assets		(1,888	)		(1,881	)
Net cash provided by (used in) financing activities		(12	)		2,012
Net increase (decrease) in cash, cash equivalents and restricted cash		29,596			(13,765	)
Cash, cash equivalents and restricted cash at beginning of period		171,053			241,284
Cash, cash equivalents and restricted cash at end of period	$	200,649		$	227,519
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	232		$	1,013
Supplemental disclosure of noncash investing and financing activities:
Unpaid liabilities related to tangible and intangible assets purchases	$	1,549		$	304

See accompanying notes to condensed consolidated financial statements.

AMBARELLA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

Ambarella, Inc. (the “Company”) was incorporated in the Cayman Islands on January 15, 2004. The Company is a leading developer of low-power semiconductor solutions offering high-definition (HD) and Ultra HD compression, image processing, and powerful deep neural network processing. The Company combines its processor design capabilities with its expertise in video and image processing, algorithms and software to provide a technology platform that is designed to be easily scalable across multiple applications and enable rapid and efficient product development. The Company’s system-on-a-chip, or SoC, designs fully integrate high-definition video processing, image processing, artificial intelligence (AI) computer vision algorithms, audio processing and system functions onto a single chip. These low power SoCs deliver exceptional video and image quality and can extract valuable data from high-resolution video and radar streams. The Company is currently addressing a broad range of human and computer vision applications, including video security, advanced driver assistance systems (ADAS), electronic mirrors, drive recorders, driver/cabin monitoring systems, autonomous driving, and industrial and robotic applications.

The Company sells its solutions to leading original design manufacturers, or ODMs, and original equipment manufacturers, or OEMs, globally.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and notes normally provided in audited financial statements. The accounting policies are described in the “Notes to Consolidated Financial Statements” in the Annual Report on Form 10-K for the 2022 fiscal year filed with the SEC on April 1, 2022 (the “Form 10-K”) and updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair statement have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Form 10-K.

Basis of Consolidation

The Company’s fiscal year ends on January 31. The condensed consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with U.S. GAAP. All intercompany transactions and balances have been eliminated upon consolidation.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies described in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022.

Concentration of Risk

The Company’s products are manufactured, assembled and tested by third-party contractors located primarily in Asia. The Company does not have long-term agreements with these contractors. A significant disruption in the operations of one or more of these contractors would impact the production of the Company’s products which could have a material adverse effect on its business, financial condition and results of operations.

A substantial portion of the Company’s revenue is derived from sales through its two major distributors, WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or WT, which serves as its non-exclusive sales representative in Asia other than Japan, and Hakuto Co., Ltd., or Hakuto, a Japan distributor, and directly to one ODM customer, Chicony Electronics Co., Ltd., or Chicony. Termination of the relationships with these customers could result in a temporary or permanent loss of revenue. Furthermore, any credit issues from these customers could impair their abilities to make timely payment to the Company. See Note 13 for additional information regarding revenue and credit concentration with these customers.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable debt securities and accounts receivable. The Company maintains its cash primarily in checking accounts with reputable financial institutions. Cash deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on deposits of its cash. The cash equivalents consist primarily of money market funds which management assesses to be highly liquid. In fiscal year 2022, the Company fully liquidated its investments in debt securities to finance the acquisition of Oculii Corp, or Oculii. As of April 30, 2022 and January 31, 2022, there were no debt security investments recorded in the condensed consolidated balance sheets.

The Company performs ongoing credit evaluation of its customers and adjusts credit limits based upon payment history and customers’ credit worthiness. The Company regularly monitors collections and payments from its customers.

Restricted Cash

Amounts included in restricted cash represent those required to be set aside to secure certain transactions in a foreign entity. As of April 30, 2022 and January 31, 2022, restricted cash was immaterial, respectively. The following table presents cash, cash equivalents and restricted cash reported on the condensed consolidated balance sheets, and the totals are presented on the condensed consolidated statements of cash flows:

	As of
	April 30, 2022		January 31, 2022		April 30, 2021		January 31, 2021
	(in thousands)
Cash and cash equivalents	$	200,639	$	171,043	$	227,509	$	241,274
Restricted cash		10		10		10		10
Total as presented in the condensed consolidated statements of cash flows	$	200,649	$	171,053	$	227,519	$	241,284

Recent Accounting Pronouncements

None.

2. Inventories

Inventories at April 30, 2022 and January 31, 2022 consisted of the following:

	As of
	April 30, 2022		January 31, 2022
	(in thousands)
Work-in-progress	$	32,892	$	25,844
Finished goods		8,631		19,375
Total	$	41,523	$	45,219

3. Property and Equipment, Net

Depreciation expense was approximately $0.9 million and $0.6 million for the three months ended April 30, 2022 and 2021, respectively. Property and equipment at April 30, 2022 and January 31, 2022 consisted of the following:

	As of
	April 30, 2022			January 31, 2022
	(in thousands)
Computer equipment and software	$	17,133		$	16,488
Machinery and equipment		7,757			7,532
Furniture and fixtures		1,253			1,243
Leasehold improvements		3,065			2,942
Construction in progress		806			1,060
		30,014			29,265
Less: accumulated depreciation and amortization		(19,876	)		(19,131	)
Total property and equipment, net	$	10,138		$	10,134

4. Intangible Assets, Net

As of April 30, 2022, the intangible assets primarily consist of software licenses as well as developed technology, customer relationships and trade name that were acquired from business combinations.

The Company enters into certain software license agreements with third parties from time-to-time. The software licenses consist of noncancelable on premise internal-use software and software with alternative use that is to be sold, leased or otherwise marketed as part of a product. The licenses have been capitalized as intangible assets, and the corresponding future payments have been recorded as liabilities at net present value. As of April 30, 2022, $4.9 million was recorded in accrued and other current liabilities and $0.6 million was recorded in other long-term liabilities in the condensed consolidated balance sheets.

The components of intangible assets as of April 30, 2022 and January 31, 2022 were as follows:

	As of April 30, 2022							As of January 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in thousands)
Software licenses	$	26,635	$	(12,486	)	$	14,149	$	22,093	$	(11,331	)	$	10,762
Developed technology		21,200		(1,661	)		19,539		21,200		(904	)		20,296
Customer relationships		13,200		(733	)		12,467		13,200		(367	)		12,833
Trade name		2,500		(178	)		2,322		2,500		(89	)		2,411
Total intangible assets, net	$	63,535	$	(15,058	)	$	48,477	$	58,993	$	(12,691	)	$	46,302

During the three months ended April 30, 2022, there was approximately $4.9 million of software licenses purchased and approximately $0.4 million of software licenses retired. The amortization expense associated with software licenses was approximately $1.6 million and $1.5 million for the three months ended April 30, 2022 and 2021, respectively. The amortization expense associated with acquisition-related intangible assets, including developed technology, customer relationships and trade name, was approximately $1.2 million for the three months ended April 30, 2022. There was no acquisition-related amortization expense for the three months ended April 30, 2021. The expected future amortization expense related to these intangible assets as of April 30, 2022 is as follows:

	As of
	April 30, 2022
Fiscal Year	(in thousands)
2023 (9 months remaining)	$	7,693
2024		8,211
2025		6,971
2026		5,408
2027		5,405
Thereafter		14,789
Total future amortization expenses:	$	48,477

The intangible assets are required to be tested for impairment at least annually in the fourth fiscal quarter or sooner whenever events or changes in circumstances indicate that the assets may be impaired. There were no intangible asset impairments for the three months ended April 30, 2022 and 2021, respectively.

5. Accrued and Other Current Liabilities

Accrued and other current liabilities at April 30, 2022 and January 31, 2022 consisted of the following:

	As of
	April 30, 2022		January 31, 2022
	(in thousands)
Accrued employee compensation	$	20,751	$	30,044
Accrued product development costs		6,992		10,523
Software license liabilities, current		4,947		6,001
Other accrued liabilities		6,664		5,496
Total accrued and other current liabilities	$	39,354	$	52,064

The timing of SoC development progress and payments to outside foundries resulted in fluctuation of the accrued product development costs. The decrease in employee compensation liabilities was primarily due to $10.9 million of annual bonus paid in the first quarter of fiscal year 2023, of which $3.2 million was paid in cash and $7.7 million was settled with restricted stock units.