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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 July 31, 2022

OR

 

 

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

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 August 31, 2022 was 38,416,764 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 July 31, 2022 and January 31, 2022

 

3

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 31, 2022 and 2021

 

4

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended July 31, 2022 and 2021

 

5

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended July 31, 2022 and 2021

 

6

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 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

 

18

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

27

 

 

 

 

Item 4.

Controls and Procedures

 

28

 

 

 

 

PART II. OTHER INFORMATION

 

28

 

 

 

 

Item 1.

Legal Proceedings

 

28

 

 

 

 

Item 1A.

Risk Factors

 

29

 

 

 

 

Item 6.

Exhibits

 

58

 

 

 

 

Signatures

 

60

 

 

 

 

2


 

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

 

 

 

July 31,

 

 

January 31,

 

 

 

2022

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

194,944

 

 

$

171,043

 

Marketable debt securities

 

 

2,970

 

 

 

 

Accounts receivable, net

 

 

37,698

 

 

 

44,307

 

Inventories

 

 

40,103

 

 

 

45,219

 

Restricted cash

 

 

10

 

 

 

10

 

Prepaid expenses and other current assets

 

 

7,138

 

 

 

6,169

 

Total current assets

 

 

282,863

 

 

 

266,748

 

Property and equipment, net

 

 

10,443

 

 

 

10,134

 

Deferred tax assets, non-current

 

 

14,159

 

 

 

15,340

 

Intangible assets, net

 

 

49,563

 

 

 

46,302

 

Operating lease right-of-use assets, net

 

 

10,263

 

 

 

11,127

 

Goodwill

 

 

303,625

 

 

 

303,625

 

Other non-current assets

 

 

3,504

 

 

 

4,269

 

Total assets

 

$

674,420

 

 

$

657,545

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

22,074

 

 

 

31,170

 

Accrued and other current liabilities

 

 

48,396

 

 

 

52,064

 

Operating lease liabilities, current

 

 

3,506

 

 

 

3,391

 

Income taxes payable

 

 

3,110

 

 

 

1,245

 

Deferred revenue, current

 

 

457

 

 

 

1,414

 

Total current liabilities

 

 

77,543

 

 

 

89,284

 

Operating lease liabilities, non-current

 

 

7,024

 

 

 

8,322

 

Other long-term liabilities

 

 

11,742

 

 

 

12,763

 

Total liabilities

 

 

96,309

 

 

 

110,369

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preference shares, $0.00045 par value per share, 20,000,000 shares authorized and no shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively

 

 

 

 

 

 

Ordinary shares, $0.00045 par value per share, 200,000,000 shares authorized; 38,406,451 and 37,302,818 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively

 

 

17

 

 

 

17

 

Additional paid-in capital

 

 

512,696

 

 

 

447,287

 

Accumulated other comprehensive loss

 

 

(2

)

 

 

 

Retained earnings

 

 

65,400

 

 

 

99,872

 

Total shareholders’ equity

 

 

578,111

 

 

 

547,176

 

Total liabilities and shareholders' equity

 

$

674,420

 

 

$

657,545

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

3


 

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended July 31,

 

 

Six Months Ended July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

80,884

 

 

$

79,327

 

 

$

171,189

 

 

$

149,460

 

Cost of revenue

 

 

29,820

 

 

 

29,908

 

 

 

63,578

 

 

 

56,276

 

Gross profit

 

 

51,064

 

 

 

49,419

 

 

 

107,611

 

 

 

93,184

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

52,338

 

 

 

39,558

 

 

 

99,028

 

 

 

77,432

 

Selling, general and administrative

 

 

18,914

 

 

 

15,821

 

 

 

39,269

 

 

 

31,848

 

Total operating expenses

 

 

71,252

 

 

 

55,379

 

 

 

138,297

 

 

 

109,280

 

Loss from operations

 

 

(20,188

)

 

 

(5,960

)

 

 

(30,686

)

 

 

(16,096

)

Other income (expense), net

 

 

(26

)

 

 

218

 

 

 

60

 

 

 

811

 

Loss before income taxes

 

 

(20,214

)

 

 

(5,742

)

 

 

(30,626

)

 

 

(15,285

)

Provision for income taxes

 

 

3,436

 

 

 

1,414

 

 

 

3,846

 

 

 

2,689

 

Net loss

 

$

(23,650

)

 

$

(7,156

)

 

$

(34,472

)

 

$

(17,974

)

Net loss per share attributable to ordinary shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.62

)

 

$

(0.20

)

 

$

(0.91

)

 

$

(0.50

)

Diluted

 

$

(0.62

)

 

$

(0.20

)

 

$

(0.91

)

 

$

(0.50

)

Weighted-average shares used to compute net loss per share attributable to ordinary shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

38,258,341

 

 

 

36,442,536

 

 

 

37,986,839

 

 

 

36,191,420

 

Diluted

 

 

38,258,341

 

 

 

36,442,536

 

 

 

37,986,839

 

 

 

36,191,420

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

4


 

AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in thousands)

 

 

 

Three Months Ended July 31,

 

 

Six Months Ended July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(23,650

)

 

$

(7,156

)

 

$

(34,472

)

 

$

(17,974

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses on investments

 

 

(2

)

 

 

(184

)

 

 

(2

)

 

 

(611

)

Other comprehensive loss, net of tax

 

 

(2

)

 

 

(184

)

 

 

(2

)

 

 

(611

)

Comprehensive loss

 

$

(23,652

)

 

$

(7,340

)

 

$

(34,474

)

 

$

(18,585

)

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

5


 

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 (Loss)

 

 

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

 

Issuance of shares through employee equity plans

 

 

323,572

 

 

 

 

 

 

1,204

 

 

 

 

 

 

 

 

 

1,204

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

26,211

 

 

 

 

 

 

 

 

 

26,211

 

Net unrealized losses on investments - net of tax

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,650

)

 

 

(23,650

)

Balance--July 31, 2022

 

 

38,406,451

 

 

$

17

 

 

$

512,696

 

 

$

(2

)

 

$

65,400

 

 

$

578,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Ordinary Shares

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

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

 

Issuance of shares through employee equity plans

 

 

371,293

 

 

 

 

 

 

1,461

 

 

 

 

 

 

 

 

 

1,461

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

17,639

 

 

 

 

 

 

 

 

 

17,639

 

Net unrealized losses on investments - net of tax

 

 

 

 

 

 

 

 

 

 

 

(184

)

 

 

 

 

 

(184

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,156

)

 

 

(7,156

)

Balance--July 31, 2021

 

 

36,644,636

 

 

$

16

 

 

$

394,121

 

 

$

608

 

 

$

108,309

 

 

$

503,054

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


AMBARELLA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

Six Months Ended July 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(34,472

)

 

$

(17,974

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,295

 

 

 

5,803

 

Amortization (accretion) of premium (discount) on marketable debt securities, net

 

 

 

 

 

852

 

Stock-based compensation

 

 

53,950

 

 

 

38,214

 

Deferred income taxes

 

 

1,181

 

 

 

215

 

Other non-cash items, net

 

 

42

 

 

 

13

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,609

 

 

 

(13,321

)

Inventories

 

 

5,116

 

 

 

(15,995

)

Prepaid expenses and other current assets

 

 

(753

)

 

 

1,033

 

Other non-current assets

 

 

765

 

 

 

435

 

Accounts payable

 

 

(11,873

)

 

 

11,992

 

Accrued and other current liabilities

 

 

4,380

 

 

 

(619

)

Income taxes payable

 

 

1,865

 

 

 

764

 

Deferred revenue

 

 

(957

)

 

 

58

 

Operating lease liabilities

 

 

(2,159

)

 

 

(1,763

)

Other long-term liabilities

 

 

14

 

 

 

183

 

Net cash provided by operating activities

 

 

33,003

 

 

 

9,890

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of investments

 

 

(2,972

)

 

 

(101,664

)

Escrow claim associated with business acquisition

 

 

749

 

 

 

 

Sales of investments

 

 

 

 

 

32,839

 

Maturities of investments

 

 

 

 

 

75,490

 

Purchase of tangible and intangible assets

 

 

(8,088

)

 

 

(3,754

)

Net cash provided by (used in) investing activities

 

 

(10,311

)

 

 

2,911

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

 

4,087

 

 

 

7,161

 

Long-term financing payment for intangible assets

 

 

(2,878

)

 

 

(2,834

)

Net cash provided by financing activities

 

 

1,209

 

 

 

4,327

 

Net increase in cash, cash equivalents and restricted cash

 

 

23,901

 

 

 

17,128

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

171,053

 

 

 

241,284

 

Cash, cash equivalents and restricted cash at end of period

 

$

194,954

 

 

$

258,412

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

661

 

 

$

1,085

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid liabilities related to tangible and intangible assets purchases

 

$

3,647

 

 

$

1,332

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

7


 

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 one of its 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 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 14 for additional information regarding revenue and credit concentration with these customers.

 

8


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. In order to limit the exposure of each investment, the cash equivalents and marketable debt securities consist primarily of money market funds