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Ambarella Delivers as Promised, Looks Forward to More Computer-Vision Success

Steve Symington, The Motley Fool

Ambarella Inc. (NASDAQ: AMBA) announced fiscal fourth-quarter 2019 results on Tuesday after the market closed, detailing continued revenue declines stemming from expected weakness in the consumer electronics market. But the video-processing chip company also showcased growth from the security-camera segment, made progress in the automotive vertical, and moved forward with plans to drive longer-term growth with its cutting-edge computer vision solutions.

With shares climbing as much as 11% early Wednesday before settling to close up around 4%, let's take a closer look at what Ambarella accomplished over the past few months.

Screenshot from Ambarella's CV1 automotive computer-vision chip.

IMAGE SOURCE AMBARELLA.

Ambarella results: The raw numbers

Metric

Fiscal Q4 2019*

Fiscal Q4 2018

Year-Over-Year Growth

Revenue

$51.1 million

$70.6 million

(28%)

GAAP net income (loss)

($4.5 million)

$1.3 million

N/A

GAAP earnings (loss) per share

($0.14)

$0.04

N/A

DATA SOURCE: AMBARELLA. *FOR THE QUARTER ENDED JAN. 31, 2019. GAAP = generally accepted accounting principles.

What happened with Ambarella this quarter?

  • Though most analysts were modeling slightly higher revenue of $52 million, Ambarella's top line was slightly above the midpoint of guidance provided in November for $51 million, plus or minus 3%.
  • Adjusted for items like stock-based compensation, Ambarella's (non-GAAP) net income was $4.5 million, or $0.14 per share. That's down from $0.47 per share in the same year-ago period but far above consensus estimates for $0.04 per share.
  • Adjusted gross margin declined 410 basis points year over year to 60.9%, also above guidance for between 59% and 60.5%.
  • Ambarella repurchased and retired 104,160 shares during the quarter for $3.5 million, leaving around $31.9 million remaining under its current repurchase authorization.

What management had to say

Ambarella CEO Fermi Wang reiterated the company's strategic direction, stating:

Strategically, fiscal 2019 was one of the most important years in Ambarella's 15 year history as the company continued to execute on its transformation from a pure video processing company to a computer vision company. We taped-out and sampled three 10nm computer vision system-on-a-chip devices and commenced mass production of one of the devices, all in the fiscal year. Despite the decline in our consumer electronics business, and the geopolitical and macroeconomic headwinds, we have and will continue to focus our investment on computer vision.  While it is early in the computer vision adoption cycle, we are excited about expanding our portfolio and having more customers enter mass production.

Looking forward

During the subsequent conference call, Wang added that the fledgling consumer-electronics market represented essentially all of the company's year-over-year revenue decline this quarter and will likely continue to decline over the next few years. Meanwhile, Ambarella's sales into the security-camera market rose around 10%, and automotive sales have stabilized and are expected to climb sequentially going forward. 

As such, Ambarella sees fiscal first-quarter 2020 revenue arriving at roughly $47 million, plus or minus 3%. By comparison -- and though we don't typically pay close attention to Wall Street's demands -- most analysts were modeling first-quarter revenue slightly above the high end of that range.

Nonetheless, investors are understandably happy with Ambarella's better-than-expected profitability and its continued progress in the key computer-vision market. And the stock is responding in kind.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. The Motley Fool has a disclosure policy.