Ambarella Inc. (AMBA +1.59%) announced decent fiscal first-quarter 2019 results on Tuesday after the market closed, detailing steady progress with its latest computer-vision chips and continued growth from the IP security and automotive markets. But with weakness in its other market verticals, and without the aid of GoPro (GPRO +6.67%) -- previously its single largest customer -- the video-processing chip company's forward guidance left the market underwhelmed.
Let's zoom in for a better idea of how Amabarella kicked off its new fiscal year, and what investors should be watching in the months ahead.
Ambarella results: The raw numbers
| Metric |
Fiscal Q1 2019* |
Fiscal Q1 2018 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$56.9 million |
$64.1 million |
(11.2%) |
|
GAAP net income (loss) |
($10.0 million) |
$2.6 million |
N/A |
|
GAAP earnings (loss) per share |
($0.30) |
$0.07 |
N/A |
DATA SOURCE: AMBARELLA, *FOR THE QUARTER ENDED APRIL 30, 2018.
What happened with Ambarella this quarter?
- On an adjusted (non-GAAP) basis, which excludes stock-based compensation, Ambarella's earnings were $0.13 per share, down from $0.44 per share in the same year-ago period, but above most investors' expectations for adjusted earnings of $0.09 per share.
- Revenue was within Ambarella's guidance provided last quarter, which called for between $54.5 million and $57.5 million.
- Non-GoPro revenue declined 12.5% year over year, as growth in IP security (primarily from Chinese customers) and OEM automotive video recorders in Japan and China was more than offset by declines in consumer drone chips, VR devices, and non-GoPro sports cameras.
- Adjusted gross margin was 61.8%, down from 64.3% in last year's fiscal first quarter, but near the high end of guidance for 60% to 62%.
- Repurchased 437,448 shares during the quarter for $20.8 million, or an average price of $47.13 per share. That left $11.1 million available under Ambarella's repurchase program.
- Ambarella's board also authorized the repurchase of an additional $100 million in shares over the 12-month period beginning on June 5, 2018.
What management had to say
Ambarella CEO Fermi Wang focused on the company's bets in the computer-vision market, stating:
We continue to successfully achieve our target milestones in the rollout of our new computer vision technology. At our Analyst Day in March, we demonstrated our fully autonomous vehicle, EVA, using our Supercam stereovision cameras running on our CV1 chip. Additionally, we have sampled CV22 chips to major security customers and achieved success with first silicon on our new CV2 chip, both delivering further deep neural network performance improvements based on our CVFlow architecture. We are encouraged by the feedback received by customers in the security and automotive markets and believe that our investment in computer vision technology will bring new opportunities for growth.
Looking forward
For the fiscal second quarter of 2019, Ambarella anticipates revenue of between $60 million and $64 million -- significantly below the $68 million most investors were expecting -- for a year-over-year decline of between 16.2% and 10.6%. This assumes immaterial revenue from GoPro, which means non-GoPro revenue is expected to fall roughly 8.6% year over year. Once again, Ambarella believes that strength in IP security and automotive OEM chips will be offset by declines in drones, VR, and non-GoPro sports cameras. Adjusted gross margin during the quarter is expected to be between 59% and 61%.
That's not to say this was a terrible quarter from Ambarella. To the contrary, the company essentially delivered just as it said it would, and its longer-term aspirations for driving incremental growth from computer-vision products remains intact. But until that growth begins to materialize, and with non-GoPro markets offering a mixed bag for impatient investors, it's no surprise to see the stock falling in response.
