Ambarella (AMBA) Q1 2023 Earnings Call Transcript

Ambarella (AMBA 0.20%)
Q1 2023 Earnings Call
May 31, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Ambarella's Q1 fiscal year 2023 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to turn the conference over to your speaker for today, Louis Gerhardy. You may begin.

Louis Gerhardy -- Corporate Development and Investor Relations

Thank you, Twanda. Good afternoon and thank you for joining our first quarter fiscal year 2023 financial results conference call. On the call with me today is Dr. Fermi Wang, president and CEO, and Brian White, CFO.

The purpose of today's call is to provide you with information regarding the results for our first quarter of fiscal year 2023. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, 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're 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 we filed with the SEC, including the annual report on Form 10-K that we filed on April 1, 2022 for fiscal year 2022 ending January 31, 2022. Access to our first quarter fiscal 2023 results press release, transcripts, historical results, SEC filings and a replay of today's call is on the investor relations portion of our website. Fermi will now provide a business update for the quarter and Brian will review the financial results and outlook, and we'll be available for your questions.

Fermi Wang -- President and Chief Executive Officer

OK. Thank you, Louis, and good afternoon. Thank you for joining our call today. During our first quarter, we announced the passing of Casey Eichler, who has been our CFO since 2018.

Casey's positive demeanor was an inspiration to many of us, and we are thankful to have experienced his leadership. On March 28, we announced the appointment of Brian White as Ambarella's CFO. After two months, we are excited about the leadership and experience Brian brings as we scale the company for the significant opportunities ahead. Our Q1 revenue was essentially as expected, flat sequentially and up 29% year over year.

CV revenue grew significantly, both sequentially and year over year, representing about 40% of total revenue, and our video processor business declined about 20% sequentially. Our blended average selling price continued to rise. During Q1, the pandemic play out in China and the resulting lockdown disrupted customer production schedules and orders placed on us, as well as logistics in a greater Asia supply chain. A majority of our customers' products are manufactured in this region and subject to impacts from China-related supply chain disruptions.

We are seeing a similar degree of impact across both our automotive and IoT businesses, further complicating the preexisting kitting issues we have discussed before. Last quarter, we reported a supply constraint for our 40-nanometer video processor SoCs. At this time, we continue to expect the Q2 impact to remain at about $5 million. We are now confident we will see a Q3 and Q4 improvement in supply of 40-nanometer video processor SoCs.

As previously noted, the supply of our computer vision SoCs has not been impacted. We are very excited to announce in late May we received first silicon for CV3, our first central domain controller processor, and we have successfully brought up the key functional blocks on this 10-plus billion transistor SoC. There's more bring-up work to be completed, but we are confident that this first -- this first rep will be sampled over the summer to key customers and it will demonstrate significant performance and the power leadership. As a reminder, CV3 will be a family of SoCs that we expect to command a selling price between five times to 20 times our current corporate ASP.

We remain focused on capturing the significant revenue opportunities in front of us. New five-nanometer products are on schedule with the CV3 cost sampling. And the CV5, our first five-nanometer SoC, is expected to commence mass production in the second half of the year. We continue to expect our CV revenue to be about 45% of revenue this year, and this richer mix is expected to drive our blended average selling price higher.

Interest and activity around our products and technology remains very strong. I will now provide some examples of our market development activity. In the automotive market, during the last quarter, Ambarella announced its success in sensing applications, an entirely new market for the company in applications such as ADAS and driver monitoring, as well as new viewing markets like electronic mirrors. At the Japanese OE Honda, two of their joint venture companies introduced EV models using our H32AQ SoC for multifunction electronic mirrors plus drive recorders.

Dongfeng Honda e:NS1 EV and GAC Honda's e:NP1 EV both use the solution. Also during the quarter, Isuzu, a Japanese OEM, introduced through a joint venture company, its new MUX SUV. Based on our CV22AQ SoC, the SUV enables an intelligent driving assistance system utilizing a front-facing camera, supporting lane departure warning. We remain optimistic about the vehicle in-cabin monitor system opportunity for us.

In June, we expect Geely to announce a new passenger vehicle utilizing our CV28AQ for driver monitoring.  Dongfeng, the largest commercial truck OES in the world, shipped its new DF 760 truck, utilizing a single CV22AQ SoC to support the multiple cameras and the multiple functions for driver monitoring around vehicle monitoring and blind-spot detection. In IoT market, our smart home business, which we have referred to as CV Wave 2, we are pleased to announce Vivint was another major CV customer. In May, Vivint announced four new products, including outdoor, indoor and doorbell cameras and the spotlight. All of the cameras implement our CV SoC to execute Vivint's intelligent AI algorithms for a variety of people and package detection and the tracking functions.

The spotlight uses the best detection algorithm of the outdoor camera to illuminate intruders and follow them as they move around the property. In the IoT market, the largest portion of CV revenue has so far been realized from new product cycles in our enterprise and the public security camera business, where the trend continues with the vast majority of our customers' design activities involving our CV SoCs. During the ISC West Security Exhibition in March, almost every major security camera company was demonstrating new products based on our CV SoCs. There were also many public demonstration at the ISC West of the companies entering the access control market with system based on our reference designs.

The access control market is a great example of how our CV portfolio allows us to reach entirely new markets we did not serve before, and access control is one of the areas where we are showing encouraging early customer wins. In access control, Motorola Solutions announced the new Openpath Pro series video intercom readers based on our CV25 SoC. The reader combines video, audio and enterprise co-routing. Motorola has made a number of acquisitions in the last few years to leverage its IoT camera expertise into new verticals and Openpath is one example.

We are proud to report that most of the camera companies acquired by Motorola are using Ambarella SoCs, and we are eager to help them grow their business. Also in access control based on our CV22, RealNetworks announced SAFR SCAN, a touchless biometric system with anti-spoofing based on the fusion of a structure light and the cameras to ensure the most accurate readout. During the show, targeting the enterprise and public markets, Hanwha Techwin announced two new AI-powered multi-sensor camera based on our CV2 SoCs and featuring deep learning-based object detection and the classification. Also in the enterprise and public IoT market, I-PRO, part of Panasonic, introduced its new multi-sensor S-series camera, which is based on our CV2 SoC offering, deep learning intelligence at the edge with pre-installed AI applications and the ability to add third-party applications.

In the public safety fleet market, i-PRO also launched a 4K panoramic front camera based on CV22 with the form factors and thermal budget to be mounted behind the rearview mirrors on the windshield. Factory automation is another greenfield market opportunity. And during the quarter, we introduced two products based on our CV2 SoC, a stereo 3D factory automation camera with precise measurement capability and the core reader with high resolution with deep learning abilities. In other IoT market, Insta360 introduced the ONE RS action camera, the innovative consumer care rights based on our H22 SoC and can shoot 4K 60 video, take 48 megapixel photos and includes AI-driven editing to make stitching 360-degree footage simple.

Recapping this announcement, a majority of the projects I just described are CV-based. In this product, our state-of-the-art video processing expertise is leveraging into new applications where the camera, instead of just enabling great human viewing experience, is sensing, collecting data and making decisions. A lot of incremental and specialized processing is needed to do this most efficiently and are highly bandwidth CV4 AI SoC provides this for an increasingly diverse set of IoT sensing applications. About half of these products I described represent new product cycles in existing markets and the other half represent entirely new markets for us such as automotive sensing, factory automation and access control.

We are in the midst of a very strong shift in design activity to our CV SoCs. Long term, we expect to earn a higher ASP with CV products and the combination of higher ASP and UD value is expected to drive premium growth. We are confident that our strategy to address the megatrends for security, safety and automation enabling our customers to innovate and transform their own business. Our rapidly expanding AI product portfolio serves the diverse secular growth opportunities emulating from these trends.

Now, Brian will review our financials.

Brian White -- Chief Financial Officer

Thanks, Fermi. I'll review the financial highlights for our fiscal Q1 and provide a financial outlook for our second quarter of fiscal year 2023, ending on July 31, 2022. I'll be discussing non-GAAP results and ask that you 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 and acquisition-related costs adjusted for the impact of taxes.

Revenue for fiscal Q1 was $90.3 million, in line with the midpoint of our prior guidance, flat to the prior quarter and up 29% year over year. As expected, a sequential increase in IoT revenue offset a decline in automotive. Both IoT and automotive were up strongly on a year-over-year basis. Non-GAAP gross margin for Q1 was 63.8%, slightly ahead of the midpoint of our prior guidance range.

Non-GAAP operating expense for fiscal Q1 was $39.8 million, down $500,000 from the prior quarter. Non-GAAP operating expense was $2.2 million, below the midpoint of our prior guidance driven by the timing of new product development activities. Our non-GAAP tax provision was $900,000 or 4.8% of pre-tax income, and we reported non-GAAP net income of $17.1 million or $0.44 per diluted share. Now, I'll turn to our balance sheet and cash flow.

Cash increased $30 million to $201 million driven by strong operating cash flow of $34 million. Fiscal Q1 cash flow was aided by decreases in both inventory and accounts receivable. Inventory decreased $4 million from 128 to 117 days, and accounts receivable decreased $16 million from 45 to 28 days. The substantial decrease in accounts receivable was attributable to a front-end skewed revenue profile in the quarter.

We had three logistics and ODM companies represent 10% or more of our revenue in Q1. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 57% of revenue. Chicony, an ODM who manufactures for multiple IoT customers, was 11%. And Hakuto, a logistics partner who primarily supplies multiple automotive customers in Japan, was about 10% of revenue.

I'll now discuss the outlook for the second quarter of fiscal year 2023. As Fermi described, the external environment remains complex and dynamic. The supply chain already stressed with persistent kitting issues is now also failing -- facing the rolling pandemic impacts in China. Our guidance, to the best of our knowledge, contemplates these challenges.

We estimate our Q2 revenue to be in the $78 million to $82 million range or down approximately 11% sequentially at the midpoint. We estimate Q2 non-GAAP gross margin to be between 63% and 64%, relatively flat to the prior quarter. We expect non-GAAP opex's in the second quarter to be in the range of $42 million to $45 million. The sequential increase in opex is driven by the beginning of an advanced five-nanometer automotive-grade CV SoC development project.

Our fiscal Q2 forecast for Ambarella's non-GAAP tax rate is 4% to 6%, and we estimate our diluted share count to be approximately 38.7 million shares. Ambarella will be participating on June 1 in Craig Hallum's virtual investor conference, June 2 at Cowen's TMT conference, June 8 at Bank of America's TMT conference, and on June 9 at Rosenblatt's virtual AI Scaling conference. Please contact us for more details. Thank you for joining our call today.

And with that, I'll turn the call over to the operator for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Joe Moore with Morgan Stanley. Your line is open.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you. I wonder if you guys could talk about the issues in China in the coming quarter. Can you tell how much of it is -- is there any demand side issues in there? Is it all supply side? And you mentioned it's broad across multiple customers.

Is it sort of Chinese customers manufacturing in China and multinationals? Just any kind of more color you could give us on what the dynamics are of the challenges there.

Fermi Wang -- President and Chief Executive Officer

Joe, this is Fermi. So what we saw was that at the end of March and early April, when we start seeing the China lockdown in Shenzhen and Shanghai, and almost at the same time, we start seeing our global customer base start pushing on their Q2 demand. And we believe that the reason that we're given was that with the kitting issue persists and also that lockdown make the kitting issue a lot worse for our global customer base, particularly for those who manufacture in China or in greater Asia locations, and they were impacted the most. And that's the scale that we are seeing.

In terms of demand, at this point, particularly outside China, I would say that most of our customers are still telling us they can sell almost everything they can build. So I think the demand at least, outside China, is pretty solid, in my opinion. We believe we will continue to monitor this progress through this lockdown situation. And we all heard that Shanghai lockdown will probably expire on June 1.

We are looking forward to see any updates on the market and from our customer point of view.

Joe Moore -- Morgan Stanley -- Analyst

OK. That's helpful. And then, in terms of the incomplete kitting issue, is that an issue that people aren't ordering Ambarella parts because they're waiting to get other things? Or is that an issue that they have inventory of Ambarella parts because they can't get those other things. Like can you tell how much of this is going to be an inventory burn off that's required versus just a pent-up demand?

Fermi Wang -- President and Chief Executive Officer

Well, I think a portion of that is definitely there is some kind of inventory in the city, in the channel. But I do believe this lockdown is really when the customer find out that they really cannot allocate enough other parts, particularly like PMIC, the Wi-Fi, particularly microcontroller for automotive. I think that they decided to push out their Q2 demand to future quarters. So I think that inventory situation is like what we discussed before.

But this time, I think that a lot of pushout is based on the kitting issue, particularly the new kitting issue, which is amplified by this lockdown situation.

Joe Moore -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

Thank you. Our next question come from the line of Ross Seymore with Deutsche Bank.Your line is open.

Ross Seymore -- Deutsche Bank -- Analyst

Hey, guys. Thanks for letting me ask a question. And Brian, welcome to Ambarella. I just want to ask about the duration side of this equation.

I know lockdowns and what COVID going to do in China is going to do is kind of beyond my pay grade and maybe you guys don't have great visibility into that. But what's your assumption beyond the July quarter, whether it be the Samsung side getting better, as I think you alluded to, Fermi, or the persistence of the lockdown headwinds?

Fermi Wang -- President and Chief Executive Officer

Well, I think the major impact on the last quarter is a lockdown headwinds. And until even today, we don't have a visibility how fast this recovery will look like. But you mentioned the Samsung situation, Samsung 14-nanometer, we still expect a $5 million impact to us in July quarter. And -- but we expect that Q3, Q4, the 14-nanometer supply will improve.

So I think this time, we are really talking about this China lockdown causing a lot of kitting issues for our customers.

Ross Seymore -- Deutsche Bank -- Analyst

And I guess as a follow-up question to get into the model. You guys are now just having the two segments, the IoT and the automotive side of things. Can you give us any color about the size they were in the quarter either as percentage of sales, what they did sequentially? I know you said up and down, but any numbers around that? And then is there a difference in the guidance for the July quarter between the two segments?

Brian White -- Chief Financial Officer

Yes. So in Q1, automotive represented about 25% of our revenue with IoT at 75%. As we look into Q2, we expect both of those segments to be down approximately equally in percentage terms. So both down in the double digits sequentially.

Ross Seymore -- Deutsche Bank -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Quinn Bolton with Needham & Company. Your line is open.

Quinn Bolton -- Needham and Company -- Analyst

Welcome, Brian. I guess, Fermi or Brian, just -- it seems like it's a dynamic environment out there with the rolling lockdowns in China. And I guess my question is, sounds like customers have been delaying orders here in the near term because of these kitting issues. Do you guys have any sense based on your customer conversations, whether you expect that to extend beyond the July quarter? Or do you think that as the rolling lockdowns hopefully come to an end that orders start to pick back up?

Fermi Wang -- President and Chief Executive Officer

I think when we talk to our customer, we got a lot of uncertainty from them because they still don't know how fast this lockdown situation will improve. We believe that if the lockdown and this kitting issue not getting any worse than right now, we believe Q3 revenue should be better than Q2 and maybe even have better recovery in Q4, but that's under a lot of assumption, that how this kitting issue and the lockdown issue will continue or not.

Quinn Bolton -- Needham and Company -- Analyst

Got it. That's helpful. And then, I guess maybe, Fermi, a longer-term question. I know you guys have been talking about the opportunity around Level 2+ design wins.

I know you haven't announced anything to date, but do you feel like you're making progress? Do you think you're getting closer to potentially a large Level 2+ win that, I believe, in the past, you've said you expect to hopefully secure at least one, if not multiple Level 2+ wins this year?

Fermi Wang -- President and Chief Executive Officer

Right. So I think that throughout all the discussion, a lot of people keep asking about our CV3. And we believe that by announcing a CV3 that is up and running, and we have brought up multiple functions there. We have high confidence that we will ship -- we'll assemble the CV3 with software over the summer.

I think this will really give our customers a sense how real this project is and what kind of performance and the power number that we can prove in a real silicon than just show up in a presentation. So I think that with the CV3, we are very optimistic about that we continue to make progress with the key tier one OEMs on these design wins.

Quinn Bolton -- Needham and Company -- Analyst

Thank you.

Operator

Thank you. And next comes from the line of Matt Ramsay with Cowen. Your line is open.

Matt Ramsay -- Cowen and Company -- Analyst

Yes. Good afternoon. Thank you very much. Fermi, I guess I wanted to follow up on what you were just talking about there with CV3.

And maybe you could give us a sense of what the steps are from here. So you -- it sounds like you have for silicon back, you have some bring out being done in the lab. There's obviously more software and BIOS and other work that you'll need to do to get everything fully up to where you can sample the customers in the summer. And what I'm interested in is just the next steps beyond that, where you guys could start to engage with customers with CV3, demonstrate stuff live in labs and what the timeline could look like to potentially start to convert some of these, I guess, the part of the automotive funnel that you're going after into one business.

So like what kind of timelines are we looking at or where we could see something announced with CV3? And what are the steps that are kind of in front of you to get there? Thanks.

Fermi Wang -- President and Chief Executive Officer

Right. So I think maybe just talk about how much we have done in -- with CV3. CV3 silicon came back to our lab seven days ago. In a short period of one week time, we basically brought up all the fundamental blocks and making sure that the chip is not only alive, we can stop doing software integration.

And we start verifying all the performance number and power number reported to our customer in the past, and we are getting our confidence level, getting higher and higher every day. So in the near -- after the sampling to our customer, the near-term goal for us is to bring up our VisLab software, as well as actualize software running on CV3 so we can do a system level demo. It's not only just demo to show the competency, as well as the ability of the silicon TV, but the overall system is delivered to our customers. I think that's a major milestone pickup because if you talk to all the OEMs that today, the biggest question for them is not only just whether your silicon can perform, but also whether you have software I can match that you can releverage and to deliver the best performance.

And that we have both VisLab, a complete software stack for autonomous driving all the way to Level 4, as well as actualized -- centralized radar processing capability. I think that's our next important milestone in the near future to demonstrate and hopefully, that we're still targeting year '25, '26 SOP with our customers.

Matt Ramsay -- Cowen and Company -- Analyst

Got it. That's helpful. Just a real quick sort of follow-up to that one, before my second question. I guess the quick follow-up is, through this summer, any sense of how many customers you anticipate sampling CV3, too? I'm just trying to understand a little bit more about the breadth of the engagement.

And then, I guess my follow-up question for Brian. Any way that you can try to size the impact of all the logistics issues in China on the guidance for July? Or I assume it's just $5 million for the Samsung impact? And then if you -- if there's any quantification of what you guys think that impact is in dollar terms, that would be helpful. I know that's a hard one to do.

Fermi Wang -- President and Chief Executive Officer

Yes. In terms of CV3 sample, I will believe it's double-digit customers.

Brian White -- Chief Financial Officer

Yes. And in terms of the impact associated with the supply chain disruptions in China, I think our guide is down about 11% at the midpoint, and that would -- that's really all attributable to that factor.

Matt Ramsay -- Cowen and Company -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of David Kelley with Jefferies. Your line is open.

David Kelley -- Jefferies -- Analyst

Hey, good afternoon. And thanks for for taking my questions. I believe you noted CV mix for the year is still on track for 45% of sales. So can you talk about the lockdown and supply chain disruptions specific to CV, if you're seeing any less or more impact there and maybe demand trends throughout the last couple of months?

Fermi Wang -- President and Chief Executive Officer

Yes. I think that this lockdown and kitting issue impact both IoT and automotive equally, but also applied to a video processor and computer vision chip equally. And we don't see particularly which product line got impact more than the others. But also, we believe that the kitting issue right now is really -- it can happen to any product line.

Because it's really, for example, both video processor and, as well as computer vision need a PMIC or Wi-Fi or microcontroller to complete a product.

David Kelley -- Jefferies -- Analyst

OK. Got it. That's helpful. And I might have missed this, apologies in advance, but can you provide a bit more color on kind of the drivers of the opex cadence here into the second quarter guide?

Brian White -- Chief Financial Officer

Yes. We said that opex would increase coming in the second quarter, which is really driven by a new CV five-nanometer project that's beginning, and that's starting to kick in to the opex.

David Kelley -- Jefferies -- Analyst

OK. Perfect. Thank you.

Operator

Thank you. Our next question comes Tristan Gerra with Baird. Your line is open.

Tristan Gerra -- Robert W. Baird and Company -- Analyst

Hey, good afternoon. I know there's been some questions, obviously, already on the impact of the July quarter guidance, and you reiterated the mix of CV at 45% of revenue, up previously. We thought that CV revenue will double this year. Assuming that the lockdowns go away on June 1, notably in Shanghai, how much of your second half concern about the top line rebounding sequentially will be, I guess, impacted by weak consumer demand in China as opposed to component shortages like MCU and Wi-Fi.

What do you think is the biggest bottleneck or uncertainty after the lockdown impact that goes away?

Fermi Wang -- President and Chief Executive Officer

Well, I think that vital to our customer beyond Q2, going to Q3 and Q4, I think the answer is really about uncertainty. Even they say they relax the lockdown on June 1, but how fast the production line can go back to normal stage? How quickly the production can start working to full speed. I think all of that needs to be answered. And that's not only just the component side, but also our customer side.

So there is still uncertainty in Q3 and Q4. In terms of China demand. I really think that the China economy that, as we see, is definitely weak, but we have roughly 15% of our sell-through, our -- 15% of our products are consumed in China. So I think we are right now more focused on to understand the demand situation outside China.

So like I said in the previous answer, I think that outside China, I think our demand is still strong.

Tristan Gerra -- Robert W. Baird and Company -- Analyst

OK. Great. And then, as my follow-up question, how should we quantify the ramp of CV5 in the second half, which I think you've said previously initially is going to go into consumer. Is that as well impacted by the current lockdowns? Or is this going to be material in terms of lifting your second half versus first half?

Fermi Wang -- President and Chief Executive Officer

Right now, because also most of the CV5 products are still in design phase and the revenue ramp-up will be happening in Q4, so I think that the lockdown or the development cycle are not severely impacted yet. We are watching it. We're still confident that several of our customers, AIoT customer, will take CV5 into production, particularly on the security camera side and, as well as I can say consumer. We don't give a consumer -- we put only in past consumer product into the AIoT.

So I think multiple AIoT customer will take CV5 production in Q4 and start ramping up from there?

Tristan Gerra -- Robert W. Baird and Company -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question comes from of Andrew Buscaglia with Berenberg. Your line is open.

Andrew Buscaglia -- Berenberg Capital Markets

Hey, guys. I wanted to talk through maybe a dynamic you might be seeing in that. If you have all these supply chain constraints, your customers are seeing, I wonder if customers that have yet some really move forward with implementing AI in their products, sort of speed that process up and move kind of to the next-gen AI stuff rather than kind of continuing to purchase and develop or maintain non -- like more so human-viewing applications.

Fermi Wang -- President and Chief Executive Officer

Yes. So I think independent of this lockdown and also the kitting issue, we did see that most of our customers' new products are CV based. Of course, there are still new projects based on our video processor, new product, I mean, that kicked off in the last several months. But in terms of percentage, we see higher and higher still CV-based product kickoff in the last or so months.

Andrew Buscaglia -- Berenberg Capital Markets

Yes. OK. Interesting. Can you -- and maybe one for Brian.

You guys have in your press release a little statement about stock repurchase that you approved and an extension. I wonder if where the stock is and where valuation is relative to all the CV development, if share repurchase becomes more of an area of capital allocation going forward.

Brian White -- Chief Financial Officer

Yes. I don't think that there's really a change to the strategy or thought process around repurchases. As you mentioned, the board did extend the existing $49 million authorization for another year. We have had strong cash flow, and we believe we have sufficient liquidity.

So we did consume around $300 million for the purchase of Oculii and the radar technology late last year. So at this point, we still view the repurchase option as being an opportunistic alternative rather than something that has changed from a strategic perspective at this time.

Andrew Buscaglia -- Berenberg Capital Markets

OK. Thank you.

Operator

Thank you. Our next question comes the line of Kevin Cassidy with Rosenblatt Securities. Your line is open.

Kevin Cassidy -- Rosenblatt Securities

Thanks for taking my question. This quarter, you had Hakuto, the Japanese automotive distributor, was a 10% customer. Last quarter, they were a 12% customer. Do you expect them to stay as a large customer and maybe what kind of service do they provide? And maybe if you could just give us a little more description of your relationship with them.

Fermi Wang -- President and Chief Executive Officer

Yes. So I think that for Hakuto, they are basically -- is our Japanese automotive distributor. And basically, almost -- I think almost all of our Japanese automotive business is -- are going through their service. Their service is just providing two things.

One is logistics, basically making sure that chip is delivered properly and we collect cash for us. On top of that, another important function they perform for us is really providing inventory for their automotive customer. Because I think all of our Japanese customers, because they want to make sure there's no supply issues, so they require their distributor, in this case, Hakuto, to keep anywhere between six to eight weeks of inventory for their production. And they are definitely planned to cut through this at the end of a project.

So and that's the main function. So while the -- because the Japanese auto business continue to grow for us, we believe Hakuto will continue to grow. But from a quarter-to-quarter point of view, the up and down cannot be really manage it because the -- some projects ramp up, some projects ramp down. But if you look at straight line, I hope -- I believe our Japanese automotive business will continue to grow.

Kevin Cassidy -- Rosenblatt Securities

OK. Great. And also on Oculii, could you give us a little more description of what progress you made in the past quarter?

Fermi Wang -- President and Chief Executive Officer

So we didn't separate out the Oculii disclosure, but it's very consistent with what we said when we acquired them. We believe this year, we're going to do roughly $3 million to $4 million of business with Oculii. Most of them are still at the module level and a large level. The first major production will happen next year in terms of automotive customer.

We haven't announced that product yet. So that's what we are doing. But however, at the same time, I think all the things -- everything I just said is based on Oculii's business before they got acquired. After acquisition, one of the major goal is to integrate Oculii's software into our CV family chip, particularly in CV3, so that we can provide -- integrate our audio -- sorry, the radar and the video solution to our customer.

That has to be a main focus for us, and that will also be a long-term revenue source for us.

Kevin Cassidy -- Rosenblatt Securities

OK. Great. Thank you.

Operator

Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Your line is open.

Jeremy Kwan -- Stifel Financial Corp. -- Analyst

Yes. This is Jeremy, calling for Tore. First, just a quick clarification. I think you mentioned a percentage of products of your revenue that is consumed in China.

Was that 50% or 15%?

Fermi Wang -- President and Chief Executive Officer

One-five.

Jeremy Kwan -- Stifel Financial Corp. -- Analyst

One-five. OK. That's what I thought. And then, secondly, in terms of the inventories, it was down sequentially, both dollars and days.

Is this something that was intentional? Was this part of the impact of the $5 million constraint? Or is this something that you're kind of managing a little bit more on the long-term basis? Just help us understand your inventory strategy here.

Brian White -- Chief Financial Officer

Sure. It was really driven by our ability to get materials during the quarter as opposed to active effort to reduce inventory levels. I mean longer term, we'll look at targeting inventory levels at potentially lower levels. But in the current environment, we're trying to have sufficient inventory on hand to satisfy customers in a very dynamic environment.

So that decrease was not driven intentionally, it was driven by our ability to get materials.

Jeremy Kwan -- Stifel Financial Corp. -- Analyst

Great. And I guess maybe a little bit of a longer-term question. Looking at some of the new markets that you're just entering, whether it's automotive, factory automation, access control, would you -- or maybe just looking at the latter two since automotive seems to be its own category. Can you maybe weigh which one you see ramping sooner? And which one might have the larger TAM?

Fermi Wang -- President and Chief Executive Officer

Well, in terms of larger TAM, I think the mobile robotics, obviously, is the largest one, in my opinion. But in terms is happening faster, in terms of revenue, I think access control is probably the candidate. But however, I think the point we tried to make is that we continue to see new verticals that we can address with our CV SoCs. And hopefully, of course, we are focusing on all of them.

But I think that we have a high hope on the mobile robotics because of the revenue potentials.

Operator

Thank you. Our next question comes from the line of Suji Desilva with ROTH Capital. Your line is open.

Suji Desilva -- ROTH Capital Partners -- Analyst

Hi, Fermi. Brian, nice to be talking to you again. Best of luck in the new role. Brian, on the opex, the R&D you talked about the five-nanometer project.

I'm wondering, is there any kind of sizable tape-out involved in the fiscal '23 time frame, which may not recur? Or is that kind of too aggressive assumption about a year-over-year trend?

Brian White -- Chief Financial Officer

Yes. When I look at Street expectations for opex for the fiscal year, I think the consensus is somewhere around $171 million to $172 million in total for the year. And that's probably in a reasonable range to think about.

Suji Desilva -- ROTH Capital Partners -- Analyst

OK. And then, one for Fermi. On the CV3, can you help us understand the design cycle there? And presumably, it's longer given the level of integration and effort on the part of the customer with radar and other things. Can you give a sense of how much longer that design cycle might be versus the other CV products as you start having customer sampling in the middle of the year?

Fermi Wang -- President and Chief Executive Officer

Right. CV3 is designed for automotive market, just by definition. It takes longer and CV3 particularly complicated because not only because of huge die, but also very complicated software integration. So we think that the four years design cycle is probably right.

The first two years is probably just on the software and also integration. The last three years is really qualification and verification. So I think that design cycle is probably standard for automotive market. I think that will be CV3's design cycle.

Operator

Thank you. Our next question comes from the line of Gary Mobley with Wells Fargo Securities. Your line is open.

Gary Mobley -- Wells Fargo Securities -- Analyst

Hey, guys. Let me start off by saying Casey will be missed, but welcome to the call, Brian. I have just one multi-part question, and that relates to your Samsung relationship. Can you give us some color on what was the issue with respect to 14-nanometer constraints? And the reason I'm asking is just to try to assess the probability of future reoccurrence of the issue.

And as it relates to perhaps some of your purchase obligations with Samsung, given the weakness in revenue, is this going to be a situation where you're going to be forced to maybe carry a little bit extra inventory than you hoped for? Or is that even an issue?

Fermi Wang -- President and Chief Executive Officer

Yes. Thank you. So for the 14 nanometers, although we didn't get a clear answer about exactly what happened, my gut feeling is that somebody took that inventory away from us by paying a lot of money. So I think that's the reason.

And obviously, that's a problem I need to talk to Samsung about and definitely setting our meeting with the CEO, trying to talk about not only the short-term problem, but also the long-term collaboration. Particularly, for example, if we need to go into this automotive business negotiations with customers that our foundry partner obviously play a major role in there. In terms of inventory level, I don't believe that we need to take on a lot more inventory than we have today. We don't plan that.

So I don't think that's an issue that we need to worry about in the near future. Thank you.

Operator

Thank you. Our next question comes from the line of David O'Connor, BNP Paribas. Your line is open.

David O'Connor -- Exane BNP Paribas -- Analyst

Great. Good afternoon. Thanks for taking my questions. Maybe one for Fermi and one for Brian.

Maybe firstly, on the Edge AI partnership with Lumentum. Can you talk from your -- around the traction you're seeing on that and the strategy kind of going forward on the Edge AI? Do you have all the building blocks and software internally to kind of support all those different end markets? Or are we going to see more partnerships like this Lumentum partnership from you going forward? That's my first question. And then, maybe one for Brian on the ASP. I think at the start of the call, you mentioned the CV3 family of SoCs with an ASP range of five to 20 times the corporate average.

Can you give us just an example of the functionality type for that five times versus the 20 times. Is that kind of redundancy or is it an L3 versus L5? Just conceptually how we should think about that, the range of ASPs.

Fermi Wang -- President and Chief Executive Officer

Right. So I think let me answer that, the ASP problem. When we talk about CV3 five times, 20 times ASP, I think that is really referring to CV3 family of chips. In fact, CV3 is a chip that we take out and we get samples.

But we are planning to sample -- or to build a family of CV3 from the low end to high end. So low end can be Level 2+ market, middle end can be CV -- low level three and high level four. So you can imagine that ASP for each different market can be different based on the current price quote giving to a customer. We're seeing five times to 20 times of a selling price versus our current corporate ASP.

And it's really about function performance, not about the redundancy yet. The other problem is you asked about Lumentum and our partnership with the other sensor company. When we introduced CV3, we mentioned that we want to be the domain controller, which means we have to integrate multiple sensor modality into our chip for different applications. For our partnership with this Lumentum is really about integrated structure line into our solution for access control market.

And we've done very well in terms of building a revenue design and winning design win with them, and we are very happy with the partnership with them. They have been very helpful to help us to solve a lot of design and production issues. But from a software point of view, we only identify all the software partner we need to have to provide this revenue design. Moving forward, I think there will be more and more these kind of cases.

We need to address many more sources of modality. We need to integrate, for example, thermal sensors, LiDAR sensors, other sensors. We continue -- we believe instead of acquiring all of them, but I think our approach will be working with partners like Lumentum and to interface our CV3 chip to their sensor modules, and then we can add in values by providing software solution on CV3. So that's our strategy, and we definitely continue to look for other sensor modality partners.

Operator

Thank you. Our next question comes from the line of Brian Ruttenbur with Imperial Capital. Your line is open.

Brian Ruttenbur -- Imperial Capital -- Analyst

Yes. Thank you very much. You mentioned in your commentary about the traction you're getting on the security side with Vivint specifically. Can you talk about other traction you're getting on the security side in the quarter? And are you able to more easily procure chips for the residential security industry versus other verticals?

Fermi Wang -- President and Chief Executive Officer

Yes. So we call the consumer security camera or security camera for home, we announced Ring and Vivint as the two major customers. We expect more in the future. In terms of supply chain issues, we see a similar impact from -- for all our customers.

For example, I think although Ring is a huge company, they really have a power to do -- to buy components. We also see them have some limitation on the supply side. So I think the kitting issue and the supply chain issue impacting everybody, just with different scale. Is there a second part?

Operator

Thank you. Our next question comes from the line of Martin Yang with Oppenheimer. Your line is open.

Martin Yang -- Oppenheimer and Company -- Analyst

Hi. Good afternoon. Thank you for taking my question. So a question on CV3 potential customers that were sample.

Can you talk about the geographic breakdown and how that compares to your current automotive customer base?

Fermi Wang -- President and Chief Executive Officer

I think it's going to be very similar. We're going to sample probably everywhere. U.S., Europe, Japan, Korea, China, we all have some identified customers that we probably will sample to.

Martin Yang -- Oppenheimer and Company -- Analyst

Thank you. That's all for me.

Operator

Thank you. Next question comes from the line of Richard Shannon with Craig Hallum. Your line is open.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

Well, thanks, guys, for taking my question for me.  Fermi, first one for you. Maybe you could talk about the competitive dynamics that you're seeing so far and expect to see with the CV3 chip both in terms of some of the new sensor modalities like radar generating. And then, also maybe compare that with the competitive dynamics with past chips going into less complex use cases. I'd love to hear your perspective there.

Fermi Wang -- President and Chief Executive Officer

Right. So I think like I said, CV3 is really competing in many different verticals and have all kinds of different performance and price. That's why we believe CV3 -- we need to have a family of CV3 chip to address all the units. You mentioned about radar side, I think there are a lot of radar company out there doing a photo image radar like LSP, Infineon and also there are some newcomers coming up with the solutions.

I think what we really differentiate our approach, Oculii has this algorithm-first approach to really try to minimize the number of antenna and RF chip you need and to achieve similar radar performance. With that that really allows not only building a high-quality cost-effective solution, but also make the centralized radar solution possible in the future, which means that also allows that we can really have a sensor fusion between video and the radar have on the same chip. This is a unique offering that we think we can -- we will differentiate against everybody else. In terms on the CV3 domain controller competitors, I think that our biggest competitor is NVIDIA and Qualcomm.

We believe that when we can demo CV3, we will be able to show the performance and power advantage that we talk about in our presentation, and we're waiting to -- we are very eager to find a way to demo that to our customers.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

OK. Perfect. I appreciate that perspective, Fermi. Maybe one for Brian here.

As we think about the goal of hitting CV 45% of sales this year, and I think it's a fair assumption to think that the IoT segment is higher relative to automotive. Would it be fair to think about that IoT segments already being or close to 50-50 CV already?

Fermi Wang -- President and Chief Executive Officer

Sorry, can you say that, what segment you're talking about?

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

Yes. So just wondering if the IoT segment already is or close to 50% of sales coming from CV already?

Fermi Wang -- President and Chief Executive Officer

Right. So in fact, that for the IoT portion, professional security camera probably is close to 50%. But other IoT level is not yet. Think about -- last year, we're only 25%.

So we need to grow to 50% this year. So by the end of the year, I will say probably the professional security segment will probably be close to 50%, maybe a little more, but other areas will be way below that.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

OK. Perfect. That's what I was looking for. Thank you for that.

That's all for me.

Operator

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Dr. Fermi Wang for closing remarks.

Fermi Wang -- President and Chief Executive Officer

First of all, thank you for joining us this afternoon. Although the fiscal year 2023 is bringing some unexpected external challenge to us, but I'm really glad our CV momentum remains very strong. I'm particularly excited about the technology development progress we made with CV3 and the business development with CV5. This true five-nanometer chip will provide significant opportunity for Ambarella for all of our markets.

And with that, I want to thank to all our stakeholders and especially our global base employees who continue to support us. Thank you. I'll talk to you next time.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Louis Gerhardy -- Corporate Development and Investor Relations

Fermi Wang -- President and Chief Executive Officer

Brian White -- Chief Financial Officer

Joe Moore -- Morgan Stanley -- Analyst

Ross Seymore -- Deutsche Bank -- Analyst

Quinn Bolton -- Needham and Company -- Analyst

Matt Ramsay -- Cowen and Company -- Analyst

David Kelley -- Jefferies -- Analyst

Tristan Gerra -- Robert W. Baird and Company -- Analyst

Andrew Buscaglia -- Berenberg Capital Markets

Kevin Cassidy -- Rosenblatt Securities

Jeremy Kwan -- Stifel Financial Corp. -- Analyst

Suji Desilva -- ROTH Capital Partners -- Analyst

Gary Mobley -- Wells Fargo Securities -- Analyst

David O'Connor -- Exane BNP Paribas -- Analyst

Brian Ruttenbur -- Imperial Capital -- Analyst

Martin Yang -- Oppenheimer and Company -- Analyst

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

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