Thank you for standing by, and welcome to Ambarella's first quarter fiscal year 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. If you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Mr. Louis Gerhardy, Vice President, Corporate Development. Please go ahead, sir. Thank you, Jonathan. Good afternoon, and thank you for joining our first quarter fiscal year 2024 financial results conference call. On the call with me today is Dr. Fermi Wang, President and CEO, and Brian White, CFO. The primary purpose of today's call is to provide you with information regarding the results for our first quarter of fiscal year 2024. 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 file with the SEC, including the annual report and Form 10-K we filed on March 31, 2023, for fiscal year 2023, ending January 31, 2023. Access to our first quarter fiscal 2024 results press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations page of our website. Fermi will first provide a business update for the quarter. Brian will review the financial results and outlook, and then we'll be available for your questions. Fermi? Thank you, Louis, good afternoon. Thank you for joining our call today. Our Q1 results was slightly ahead of our expectations, despite the significant headwinds from the ongoing semiconductor industry cyclical downturn. We are not allowing this difficult environment to distract us from further developing our AI business. Before I talk about the details of the quarter, with all the cross currents in the market together, with all the exciting developments in the AI market, I thought this would be a good time to review our strategic vision. Simply put, our transformation into an AI company is well underway, with AI already representing 45% of total revenue last year and an estimated 60% this year. With our CV3 platform, we are expanding into a new phase of AI market development. The AI market is at a very early stage. It is also dynamic, with many technologies and applications emerging. With all excitement about AI, the key to our continued success will be our focus and the degree to which we can leverage our unique core competencies. Even with our focus, our current service available market, or SAM, is sizable, exceeding $4 billion this year and approaching $10 billion in fiscal year 2028. What are we focused on? Ambarella is focused on deep learning AI processors and the software, which are replacing the legacy and the less powerful traditional machine learning approaches. With the deep learning market, the AI processor market has been dominated by training processors using servers, typically for the cloud, data center, or enterprise. Our focus is on AI inference, which is where AI models get deployed and are practically utilized by end users. As the AI market begins to mature, most third-party research firms forecast the size of inference AI to surpass training AI. We have already demonstrated how we can leverage our rich heritage in human perception, also known as video processors, into AI. Our CV2 family was our first move into AI, and it targets inference AI perception processing at the edge, where cameras are the principal sensing modality. We continue to expect the CV2 family to be approximately 60% total revenue in fiscal year 2024 and to represent a material portion of our operating profit dollars. The CV2 SoC integrates our camera perception expertise with our proprietary 2nd-generation CVflow AI architecture. The incremental processing to enable AI costs, causes our CV to blended average selling price, ASP, to be greater than 2 times a video processor. This contributed to an over 20% increase in our firm-wide ASP in fiscal year 2023. This year, the CV2 family is expected to become the dominant driver of our revenue and remain a key driver for several years. The solid stream of operating profit from video processors and the CV2 family of edge AI processors is now being reinvested into the significantly more powerful CV3 platform, targeting mobility applications. The CV3 platform builds upon our CV2 family experiences and utilize our proprietary third-generation AI inference processor. For the typical level 2-plus application, the CV3 SoC provides the perception processing for all the camera and the radar sensors, as well as the processing required in the fusion and the planning layers. The significant amount of incremental processing expected to facilitate a CV3 SoC ASP to be 5- 20 times higher than a CV2 SoC. It is also very important to understand CV3 is a platform, as the SoC in a CV3 family can capture incremental value by running our own autonomous driving, AD software stack IP, and/or radar perception software IP. We aim to bundle this software IP with our CV3 SoCs in a platform approach, providing our customers with the flexibility to pick and choose exactly what they need. Regarding our autonomous mobility partnerships with Continental, I am pleased to share that we extended our partnership to Level four system development and confirm the first business award of our jointly developed stack as a complete Level four fallback system. The system will be supplied to Continental for customer in the commercial vehicle industry. To be clear, the CV3 platform is a major leap forward in terms of our value proposition, and it brings a new list of target customers, automotive OEMs. We are still in the early stage of building out the CV3's SoC portfolio and developing the market. However, we are not doing this alone. With leading tier ones like Bosch and Continental, porting their software to CV3, validating our superior efficiency, jointly marketing to auto OEMs, using their scale and bring more credibility to our CV3 market development efforts. Additionally, for the AI server inference market, we have already evaluated running large language model, LLM, on CV3-AD High, which has been sampled for nine months, and we believe the LLM performance on this existing SoC to be as good as NVIDIA A100, with much lower power consumption and a superior total system cost. We are now establishing a software development effort as well as a business development program to engage with customers. Turning to new product and customer engagement in this quarter. In March, at ISC West Security Show, we announced our CV72S for mainstream enterprise and public cloud security cameras. CV72S utilize the same third generation CVflow deep learning AI accelerator architecture utilized in the CV3 SoCs. This CV3 derivative SoC bring to the IoT market the highest AI performance per watt, the fusion of radar and camera data, and it includes support for the latest transformer neural networks. CV2S offers six times the AI performance of a CV2 family, enabling it to run Ambarella's groundbreaking neural network-based image signal processing software for 4K color, night vision, and HDR, with plenty of headroom for additional concurrent neural networks. CV72S is now sampling to leading IoT camera companies. In IoT, there were a number of new enterprise and public security camera introduced, including Motorola, who introduced the H6SL camera line based on CV25, as well as the V700 body camera based on our S6LM SoC. The Verkada introduced its TD52 Ring View intercom, featuring 5-megapixel camera based on our CV25. i-PRO, formerly Panasonic, Japan's largest security camera supplier, introduced multiple new product family based on our CV2, CV22, and CV25, including dual and quad multi-imager models. The European market leader, Axis, part of Canon, introduced its 3905 rugged dome models designed for surveillance on board vehicles, such as buses based on our S6LM. Also in Europe, Dallmeier introduced Domera E-Series camera, which use our CV22 AI SoCs to enable imaging in total darkness, utilizing adaptive IR illumination. In the home manufacturing, in the home monitoring market, Alarm.com introduced its ADC 780 battery-powered doorbell based on our S5LM. I will now talk about the progress in the automotive market. As mentioned earlier, our new CV72S SoC is an important CV3 derivative for the IoT market. It is expected to also be an important derivative product for the automotive market, and in April, at the Shanghai Auto Show, we announced and demonstrated CV72AQ. This SoC targets multiple automotive applications, including Level 2 plus and other applications with up to 6 cameras and 5 radars running on the same SoC. CV72AQ demonstration at the show included an ADAS Plus markings parking system with a 5-camera configuration, including an 8-megapixel front camera and multiple 3-megapixel fisheye camera running ULO V7 neural networks on each camera. We also demonstrated versus a leading GPU solution, superior performance and lower power consumption over CV72AQ running transformer networks. We received very positive feedback on CV72AQ from tier ones and OEM in China. As of the Shanghai Auto Show, a number of other tier ones demonstrated CV3-based assistance. This included Continental, who show of 10-camera live demo with multiple neural networks running on each video stream. Hyperview demonstrated its GT HyperMax platform, featuring a sensor suite of 11 cameras, plus one lidar, and 3 radar in a car, providing CT navigate on pilot advanced functions and leveraging the latest transformer network. In March, China's GAC introduced its electric AION Y L2+ ADAS SUV with an intelligent 1V1R driving assistance system based on our CV22AQ AI SoC. In April, Geely Zeekr introduced its Zeekr X electric SUV with a face recognition access control system based on CV28AX AI SoC. In summary, a majority of our new customer engagement in activity continue to be our AI products. AI is expected to be a majority of our revenue for the first time in fiscal year 2024, and AI should continue to grow as a proportion of our mix. To bring our AI strategy vision together, first with the CV2 and now again with an even more significant CV3 platform, we have leveraged our core competencies, cumulative knowledge, and unique approach to establish strong presence in the AI deep learning domain. Our investment yield differentiated products that are very different, are very efficient, and on open platforms that are scalable and flexible. The CV2 family is already very profitable. We are well into the development phase with the CV3 platform. In summary, there is still a lot of work left to execute to our strategy. That the ongoing semiconductor industry cynical downturn pressure our near-term financials. However, we are confident in the long-term secular growth opportunity for edge inference AI. We do not intend to stray from our strategy vision. We are continuing to invest in our differentiated AI strategy. I will now turn it over to Brian to discuss the Q1 results and the Q2 outlook in more detail. Thanks, Fermi. I'll review the financial highlights for the first quarter of fiscal year 2024. I'll also provide a financial outlook for our second quarter, ending July 31st, 2023. 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. For fiscal Q1, revenue was $62.1 million, in line with the midpoint of our prior guidance range, down 25% from the prior quarter and down 31% year-over-year. As expected, total automotive revenue was approximately flat sequentially, while IoT revenue was down sharply, driven by customer inventory reduction actions. Non-GAAP gross margin for fiscal Q1 was 63.1%, in line with the midpoint of our prior guidance range of 62%-64%. Non-GAAP operating expense for the first quarter was $46.2 million, up $200,000 from the prior quarter and below our prior guidance range of $47 million-$49 million. The lower operating expense was driven by continued expense management and the timing of spending between quarters. We remain on track to our internal product development milestones. Q1 net interest and other income was $1.3 million. This was higher than our original forecast, driven by a higher cash balance and returns on cash invested. Our non-GAAP tax provision was $300,000, or -5.5% of pre-tax income. This was slightly lower than our original forecast, driven by the mix of pre-tax income across tax jurisdictions. We reported a non-GAAP net loss of $6 million or a $0.15 loss per diluted share. I'll turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities increased $20.5 million to $227.4 million. DSO improved significantly from 57 days to 43 days, as the timing of shipments throughout the quarter normalized after being back-end loaded in the prior quarter. Ending inventory increased slightly, up 1.8%. Days of inventory increased more significantly from 116 to 151 due to the sequential reduction in cost of goods sold on lower revenue. Cash from operations was strong at $22 million, driven by the decrease in accounts receivable, and CapEx for tangible and intangible assets were $2.3 million. Free cash flow, defined as cash from operations, less CapEx, was 31.7% of revenue for the quarter and 6.4% on a trailing 12-month basis. We had two 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 49% of revenue. Chicony and ODM, who manufactures for multiple IoT customers, was 16% of revenue. I'll now discuss the outlook for the second quarter of fiscal year 2024. Customer feedback on end demand remains generally healthy. However, at the same time, customers also continue to aggressively manage down their inventory levels. Considering these factors, we estimate that our fiscal Q2 revenue will be flat to Q1 and in the same range of $60 million-$64 million that we guided for the prior quarter. By end market, we expect that both automotive and IoT revenue will be approximately flat sequentially as well. We expect non-GAAP gross margin to be in the range of 62.5%-64.5%, up slightly from Q1. We expect non-GAAP OpEx in the second quarter to be in the range of $48 million-$50 million, with the increase compared to Q1, driven by higher R&D tied to new product development activities. We estimate net interest income to be approximately $1 million, our non-GAAP tax expense to be approximately $700,000, and our diluted share count to be approximately 39.7 million shares. Ambarella will be participating in TD Cowen's Technology, Media, and Telecom Conference on May 31st and June 1st, Bank of America's Global Technology Conference on June 6th, and Rosenblatt's Age of AI Conference on June 7th. 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. Certainly. Ladies and gentlemen, just as a reminder, if you have a question, please press star one one on your telephone. One moment for our first question. Our first question comes from the line of Gary Mobley from Wells Fargo. Your question, please. Hey, guys. Thanks for taking my question. I wanted to ask about inventory drawdown with customers. You mentioned that customer end demand appears to be healthy, but obviously, you're under shipping end demand. Could you give us a sense of by how much or how close we are to, you know, inventories getting back down to a normal level? Maybe you can comment as well, specific to China-related demand. Yeah, this is Fermi. I think like Brian White said, you know, we haven't seen a huge change from the customer side. For example, last quarter, we talk about customer that has healthy growth with based on our silicon, our silicon revenue from that is down, you know, 15%, 20% year-over-year. That situation continues, and I think the customer continue confirm that their growth and will continue to forecast lower revenue this year. I think from that point of view, I think the situation is very similar to last quarter, and we have not seen anything, any indication that this inventory correction will end. I think the, what we are looking for is really that the ramping up of a new orders consistently from different customers, that will probably give us an indication that it's recovered. We haven't seen that yet. As a follow-up, I wanted to ask about your win that you captured in conjunction with Continental. Is that an automotive grade win? Maybe you can give us a sense of where automotive, other automotive grade wins, you know, may stand. Right. That's an automotive grade win. Like I said, it's a level four car, and it's going to be auto-grade chip, and it's going to be its first design win, that we work with after we announce and working with, Continental. In this design win involves not only our CV3 SoC, but also our software IP, the software stack that we are, Conti and us are co-developing. I think it's a combination of software and the SoC win. We are working on other design wins. We, for example, we talk about, first of all, we continue to work with, tier ones like Conti and Porsche on any potential design wins. Same time, we also mentioned that in China, I think we start seeing that a lot of opportunity in L2+ cars, especially at Auto Shanghai, we introduced our CV72AQ. It make us believe that we have plenty of opportunity there, we are optimistic that we're going to close some design win this year there, also the time to revenue is much faster with those potential design win in China. Thanks, Fermi. Thanks, Fermi. Thank you. One moment for our next question. Our next question comes from the line of Ross Seymour from Deutsche Bank. Your question, please. Hi, guys. Thanks for letting me ask a question. Fermi, you mentioned that you haven't seen any signs of the end of the inventory digestion that's going on, and that growth would really resume when some of the new products kick in. Can you, I guess, dive a little bit deeper into that? The two-part question would be: Where do you believe the revenue level would be for your company versus this $60 million-$64 million, if you were shipping to true end demand? To the extent it's dependent upon new products kicking in, when do you believe that occurs? First of all, I think that we are not waiting for new product to kick in. We believe that the current inventory correction, when they finish, the existing product line will come back alive and will go back to original level. We are not counting on new product design win to fix this inventory correction problem. For your first question, in terms of level, last quarter, when we look at just one example of a customer, we think that we are probably like a 25%, 30% below the realistic level. I think we still hope, believe that's the level, the differences we're looking at. Hopefully, when the inventory correction finish and all the customer went back to normal, I think that should give you indication where we think the normal level of revenue is. Got it. I guess for my follow-up on the automotive side, specifically, it's good to see the design win with Continental turned into products, et cetera. That business has been basically flat sequentially, I think for four quarters now. Three quarters are reported, and I think, looks like you're guiding it relatively flat. When's the timing where we should start to see that business picking up? You guys have talked about this investment. I know it's a longer-term strategy for the company, but it seems like one that should yield some pretty strong tailwinds off the size company you're currently running at. Just wondered on the timing that we should look for and what the drivers of that growth should be. I definitely think that the flat, if you look at the, there are few quarter before the inventory correction, and now you're comparing to the inventory correction period. I think with the last two quarters definitely being impacted by inventory correction in the automotive section. I also believe that as soon as inventory correction finish, which auto should show some revenue growth from that point of view. Like you said, the really big auto growth should come with, you know, the see the AVAS market and also Level 2+ market when they're going to production. Great. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Tristan Gerra from Baird. Your question, please. Hi, good afternoon. Just wanted to have a follow-up on the, in the inventory correction and also try to tie this with market share shift. It's no secret that some Chinese companies have tried to diversify away from U.S. supply, either because there is a push from that for that from the Chinese government, or because they're concerned about potential future sanctions. I know you've very much de-risked your surveillance camera exposure to China in the past, but you still have exposure in automotive. I wanted to know if there is any signs that perhaps the ramp in China is not expected at the pace that you thought would happen a year ago. Are you getting any feedback? Just to the extent that the inventory correction that you're describing seems to be a bit more pronounced than some of the other companies, where it's been, you know, really more smartphone and PC-centric for other companies. Any elaboration around that would be great. Right. In terms of the geopolitical situation, I think for automotive market, it's much less severe than a security, right? Security is really being viewed as, you know, the safety of the country. That's why I think people trying to avoid US components. In automotive, in fact, if you look at the middle or high-end, all the components in Chinese market today, all of them are US components. I think that's because in automotive processing, I think that our solution among other US components still have better performance efficiency. We haven't seen a similar impact from Chinese government on mandating the US Chinese automotive OEM use exclusively the Chinese component. I think that's the 2 things add together. I think I still believe that we won't see a severe downturn on the Chinese automotive business. Okay, great. Then, as my follow-up questions, obviously, you've made that, software acquisition. You have, the sensor fusion chip. Do you think you have all the pieces you need to move into, L2+ and L3 application? Are you getting any feedback about customers, you know, looking at your company size versus, say, larger supplier? Is it purely based on chip performance, where obviously you excel? Is there any other consideration that... How you, in terms of getting design wins and, how you would address that? That question will also tie to, the product roadmap and, you know, whether customers are kind of wondering, you know, where will you be, you know, 5 years out in terms of product roadmap. I think the, from a product roadmap point of view, I think for Level Two Plus, Level Three car, I think we have all the contents that we need to go after this market. Of course, from the hardware and software point of view, I think we can offer a complete solution. From a strategy point of view, as we said before, we are not bundling hardware and software together. We are trying to offer a software platform that customer can pick and choose, and we can help our customer to build their own software stack. Working with Continental is probably the best example. In terms of scale, it's always a problem. I try to compete with a bigger company is always a disadvantage for us. I think that's the reason we continue to try to work with the bigger tier ones, and, using, with their scale and with their expertise, that will help us, partially to address this problem. Great. Clearly, the Continental and Bosch design wins speak to that effect. Thank you very much. Very useful. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Tore Svanberg from Stifel. Your question, please? Yes, thank you. First question, Fermi, could you just talk a little bit about the main difference between the CV380 and the CV38Q? You know, whether it's functionality or ASPs or, you know, any other color you can share with us. Right. CV380 and the CV72AQ. First of all, they are all based on the same CV3 architecture. All of them using the third generation of AI inference, AI processor. The difference, main difference is the CV380 is designed for the auto-grade, chip-level SoC, and CV72AQ is designed for the system-level, auto-grade. I think that's the main difference. I think the, for example, CV72AQ, definitely is targeted for Chinese market, where that people are willing to accept, system-level, SoC system versus a chip-level SoC system. That's the main difference. Very good. Thanks for clarifying that. My follow-up question, you announced the design win for the software IP modules. Again, was just hoping you could elaborate a little bit more on that. You know, it's surprising to me when I hear software IP module, right? Because I think hardware and software. How exactly, you know, is the accounting for this particular design? When we are I think I see, as we announced, this is a software partner with Continental. Basically, the idea is that we are contributing a portion of software solution, and we work with the Continental software team to integrate those modules into a complete software stack, leveraging strength of both sides. For example, Ambarella's is strength is on the perception side, particularly today, is video perception, radar perception. Continental definitely has a lot more system-level solutions and famous for their, you know, auto-grade system software. I think that's where we see that we can leverage both sides of our strength and build a software stack, based on, you know, leveraging the both sides' strength. I think that's an approach that we're different than the customer, and also for OEMs, that if there are anybody who want to do a similar business model, we are open to that, too. On the sort of revenue accounting for, I mean, is this a module sale or IP revenue? No, it's. Part, yeah. Oh, I see. That's a basically software revenue split. We need to decide how to share the software revenue together. Understood. All right. Thank Thank you very much. Thank you. One moment for our next question. Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your question, please? Yes, thanks for taking my question. You know, maybe a similar question to what Tristan had about automotive, but in the AI server, as you move to the adjacent market, AI server inference. You said you have about the same performance as NVIDIA A100, but much less power. Can you say, like, do you have all the tools you need to move into this server market or into the cloud inference market? Right. Obviously, you know, the similarity between our current automotive market and the new AI server market is they are really running a neural network on our chip. From tools point of view, that we already developed many software tool to help our customer to port the neural network onto our chip. Obviously, LLM is different beast because they are much larger than the typical neural network that we are working with. Definitely there is optimization cycle we need to work on. The reason we decide, and we think we have a great opportunity here, is, first of all, we have a working silicon can demo. Two, we have a bunch of expertise and the software tools available that we build for other market. Three, we just need to fine-tune and optimize the current software for this LLM to achieve the best possible performance that we can get. I think from that point of view, the effort for us is limited. I think that we also believe that in the market, very few people can claim what I just said, that, you know, we have a working silicon, can show real performance and real low power consumption and also demo to the customer. I think that's our advantage, and I also believe that the extra resource we need to put on is something that we can handle. Great. What would be the go-to-market strategy? Are you looking for a few, maybe, flagship customers to lead the way, or are you going broad with lots of different customers? I think we have to be focused. I think we need to identify the sweet spot. I think, you know, we should talk about strategy later because we are in the process of talking to customers. I think we need to focus on where our strength is and also focusing on companies that has a can leverage our chip in, and our software immediately. I think that one thing we learned is, you know, to work with a customer who has really they feel the most painful experience with current solution, will most likely to work with us, and that's where we're gonna focus on. Okay, great. Very interesting. Thank you. One moment for our next question. Our next question comes from the line of Quinn Bolton from Needham & Company. Your question, please? Hey, guys. Thanks for taking my question. I guess, Fermi and Brian, maybe just your best guess. I mean, we've been, you know, working down this inventory now for a few quarters. Certainly doesn't sound like it's, you know, you haven't seen any green shoots yet in terms of the orders. What's your best guess as to how many more quarters you think it will take to work down this inventory? Do you think we'll be pretty clear by the end of your fiscal year or the end of the calendar year? Do you think it could take longer? Yeah, Quinn, this is Brian. A quarter ago, we said that, you know, our guidance would, for fiscal Q1, which was $62 million at the midpoint, we thought that that would represent, you know, the bottom as it related to impacts associated with inventory adjustments, and that it would likely not get worse from that point. We're kind of sitting in the same place we were 90 days ago, from the standpoint that we still believe that's the case. What becomes challenging is forecasting, you know, when this thing lifts off again and at what slope. We certainly have visibility to backlog, but that backlog has been shifting, right? We've had reschedules, cancellations that we've had to deal with. While in normal times we can look at that backlog and have a lot of confidence as to how revenue might shape up, say, in fiscal Q3, because of the movements that we've seen, our confidence in providing a forecast would be lower in this cycle than, you know, kind of in normal times. We don't see it getting worse, but the visibility to the second half and just how that recovery plays out, I think is hard for us to talk to at this point. Understanding you're not getting to the fiscal second half, you know, historically, you've seen some, you know, stronger seasonal trends in the second half. I mean, can you just provide any framework how we might be thinking about it if the inventory doesn't get any worse and you see normal seasonality, that would imply a lift? Obviously, if you start to see the inventory correction, and that would imply a lift. I mean, are you sort of suggesting, "Hey, keep it in the 60 to 64 range, you know, until you see the inventory clear?" Or do you think you can see some seasonal upticks, you know, in the second half? Well, you know, normally we would see some uptick, you know, in the fiscal third quarter in particular. You know, and we would hope that we do again, but we're just at a point where we don't have the visibility, the confidence to put a number out there and try to give you some, you know, magnitude of directional increase at this point in time. Got it. understood. Thank you, Brian. I guess for Fermi, I guess I was a little surprised to see your first win with Continental, being a level 4, when I think the initial partnership you'd announced, you know, back, late last year, I think was for level 2+. Can you just sort of maybe talk about how the level 4 win came together? I know you, you'd expanded the relationship at CES, maybe, you know, that was on the fast track. You know, when, you know, were you surprised that the level 4 came before level 2 plus with Continental? Well, I think that the engagement, definitely after we announced this software collaboration between Conti and us, which happened at CES, and things go really fast after that. I think definitely I am just surprised how fast this developed. Also, I need to thank Conti that putting this whole thing together, because the one important thing is that to sell that joint software stack and get the confidence with customer is important for us, and I think that's a great win for us. At the same time, I want to say again, on a level two plus, I think that, you know, when we look at two things, one is the momentum with Conti and the Bosch still, that we're still working on and are still there. More importantly, I really think now with the Auto Shanghai and with our CV72AQ announcement and the sampling the component and the software to a customer recently, that gives the confidence that we're going to see CV72 AQ level 2+ design win this year and maybe quick revenue returns. In China, you know that the design cycle is not 4 years. Usually, it's less than 2 years. We are hopeful to see a really quick revenue return from the CV72AQ, and also that we have a roadmap continue to address this market. I think overall, I think L2+ design win is, we are continue to be our focus, and we think we'll continue to deliver what we think that we can do. Perfect. Thank you, Fermi. Thank you. One moment for our next question. Our next question comes from the line of Brian Ruttenbur from Imperial Capital. Your question, please? Yes, thank you. Can you give me, first of all, housekeeping D&A and the period depreciation, amortization? Depreciation and amortization, is that the question? Yes, that's affirmative. Yeah. For fiscal Q1, I believe it was $5.8 million. Okay, $5.8 million for the first quarter. Also, in terms of DSOs, do you anticipate DSOs stabilizing here? In other words, trying to understand your cash situation probably will just go down. You probably won't have to stairstep event again, or do you anticipate DSOs continuing to go down? No. I mean, what we saw in fiscal Q1 was a normalization of the timing of shipments throughout the quarter, versus, say, fiscal Q4, where shipments were very back-end loaded. We had a couple of quarters, fiscal Q3, Q4 were both very back-end loaded quarters. Q1 normalized, DSOs came down. That provided about a $22 million benefit to cash flow in the quarter. As we move forward, we would expect DSOs to remain at similar levels, thus, we would not expect to get a large benefit in a future quarter from another stairstep down, for example. As we move into Q2, you know, obviously, at the revenue level and the other metrics that we gave you, that would be a forecast for a non-GAAP loss. You know, you'll have lower free cash flow in fiscal Q2 versus Q1. As we go through the year, cash flow is just going to be highly dependent upon the revenue levels. We've talked about the fact that we don't have great visibility at this point in time to the second half revenue. Great. Thank you very much. Thank you. One moment for our next question. Our next question comes from the line of Suji Desilva from ROTH MKM. Your question, please. Hi, Fermi. Hi, Brian. Good to see the Continental win. I don't know if I missed this, but did you say the L4 commercial vehicle customer, what geography that was? We didn't. We, you know, our customer doesn't want us to disclose that yet. Okay, fair enough. Then, I think, Fermi, you talked about a range of ASPs, 5x-20x. Can you just talk about what drives the delta there? Is that more compute horsepower on the chip, or is that compute plus software? Any color there would be helpful. I think that comment is purely for silicon, does not include the software. The difference is really from the low end to the high end. For example, the lower end for the high-end chip, we talk about, you know, $400+, and the lower end, for example, our CV3-AD655 chip that we're talking about is probably in the $100 range. It's really that level of the different performance price range that we're talking about. I also believe that for automotive roadmap, you need to have a family of chip to address different performance level. For Level 4, Level 3, Level 2+, even multiple layers, Level 2+ require different chips. I think that's where we're talking about. Okay. Thanks, Fermi. Thank you. One moment for our next question. Our next question comes from the line of David O'Connor from BNP Paribas. Your question, please. Great. Good afternoon. Thanks for taking my questions, guys. Maybe Fermi, just going back to the question on the AI inference opportunity. Can you just give us a bit more detail there on what type of customers are potentially kind of you could engage with on the AI inference side? Is that data price or enterprise, or any particular vertical that you think may be open to you? I know it's early days, but as you mentioned, you have a working chip, and you need to rework the software. What kind of time frame do you think you could potentially get to revenue there? Is that kind of 3-5 years out? Is it kind of, is it before that? Anything around kind of content opportunity there would be helpful. Thank you. Yeah. It's a lot of questions. I think, like I said, the target market is really where, you know, is our first target is really on the edge server side, which where you can focus on, you know, the enterprise and the people who are running their own neural network. you know, it, you know, for people running OpenAI or other very large model, that might not be the best customer at this point for us, but there are plenty other different software SVs and then that driving different neural net model, either for the own code, or they are running the enterprise level. Those are the probably sweet spot for our chip, because we know that just like I said, the scale definitely matters in this market, too. We need to pick the best market to go after. That we're still in the process to figure that out, but I definitely think that what I just said is along our current thinking. I think in terms of it, you know, the content, I think is obviously even better than our automotive ASPs, because the competition out there is selling at a much higher level. Also we have a great advantage on both on the power consumption side. We're not talking about 5%, 10%, we're talking about significant difference between power consumption, as therefore, as well as the total system cost. I think from that point of view, it will help us to get a healthy, content there. I think there's another question I forgot. Time to revenue. Time to revenue. you know, we I think we need to get a demo running, then a software tool running so the customer can port, then we can talk about design win, then we talk about revenue. I think If you ask me today, I will say that's a 24 months process. Totally. That's a wild guess. That's very helpful. Yeah. It's quite helpful to frame that. Thank you, Fermi. Maybe just to follow up on that for Brian, just on the ramping that software development team, just to clarify, that fits in with the current OpEx envelope, or would there need to be some kind of step up there to fund that new team? Thank you. Yeah, our plan is to use our current expertise and team to facilitate this activity. The idea is simple, because our internal team is, you know, helping many other customers to port their neural network onto CV3. We understand LLM, because it's so large, and it take extra effort, so that the best way to do this is fund it and put a internal resource on this project. Obviously, that it will take a trade-off, right? We don't plan to add much of the resource into the company, so I think that we need to really focus on the area where we think is important. I think where is important for us is definitely security camera to provide cash for us, maintaining our CV3 momentum with the current design wins like Bosch and Continental, and try to secure CV3 design wins with OEMs, and also try to find the resource to fund this LLM. Everything else is a trade-off that we need to consider. Great output. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Vivek Arya from Bank of America. Your question, please. Hi, this is Blake Friedman. I'm from Vivek. Thanks for taking my question. Just first on the cash side, just curious, I know you've mentioned talking about recent R&D investments over the next few quarters. Just with at your current cash level, are you comfortable there, or do you see any needs to raise incremental cash in the future? We don't see any need to raise incremental cash. We have strong cash balance, no debt, and it's got a history of being positive from a free cash flow perspective, so no need to raise additional cash. Great. Quickly as my follow-up, just given at current revenue levels, we've seen a relatively substantial change with the split between IoT and autos now, roughly 65%, 35%. Gross margins have still held up relatively okay and above this, his sort, the long-term range of 59%-62%. Just curious if you can give us the puts and takes on the gross margin side and maybe beyond Q2, out first line level. Yeah, I think, you know, we'd stick with that long-term model that we provided previously. In, you know, recent history, we've been delivering higher gross margins than that, and we would expect that that would, you know, continue until we get into the impacts of potentially very large automotive opportunities, and that's why that long-term model provides for a slightly lower gross margin if we need to get there to secure those design wins. For now, in the foreseeable future, we should be at recent gross margin levels and, you know, and probably a little bit higher once we get through this inventory correction and get back to, you know, slightly higher gross margins than we were posting last fiscal year. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Martin Yang from Oppenheimer. Your question, please. Hi. Thank you for taking this question. I'm sorry, cannot hear you well. Can you hear me better now? Yes. Yes. Do you expect most customers, either on automotive? Hey, Jonathan, let's go to the next question, and then, we'll give Martin another chance in after this question. Okay, understood. One moment for our next question. Our next question comes from the line of Matt Ramsay from TD Cowen. Your question, please. Hi, this is Josh Buchalter on behalf of Matt. Thanks for squeezing me in. It was great to see that the CV3 win with Continental for commercial applications. I was wondering if you could provide, you know, some initial feedback on how it's going on the consumer passenger vehicle side. You know, I recognize it's only been a few months since the partnerships have been announced, but you're going against some entrenched and large competitors in the central ADAS domain, and I was wondering how Continental and Bosch are positioning your CV3-based solutions to win in that market. Thank you. Yeah, I think, you know, first of all, I, you know, we have a strong relationship with both Bosch and Conti, and the Conti has even further up collaboration because of software relationship. You can see that software relationship already start paying off, not only on the level 4, but also we start building engineering collaboration on that. I think that activity definitely is very helpful. Also on the business development side, both sides are, you know, working with the Conti and Bosch definitely help us to address the scale problem partially. Also, we believe that we continue to believe that working Conti and Bosch is the right thing for us to do, to get designing in the U.S. and Europe. I think that say that I also believe that our first L2+ design will come from China, like I said, because the momentum we see after the Shanghai Auto Show is real, and that we not only demo a powerful chip, but also we demo something that very few people can do, which is running transformer neural network in a lower-end chip that just nobody out there it can demo. Like, the company you mentioned, now then the low-end chip can demo transformer efficiently. The transformer becomes such an important neural network and is being used as benchmark everywhere. Particularly in China, where AI neural network performance is very much appreciated. I think that's a momentum where we definitely enjoy it, and I think, I hope that we can get several design wins in China this year. Appreciate the color. That's actually a nice segue to my follow-up. Can you talk about, I think this is the first time you've mentioned auto being a source of inventory correction, despite the results coming in line with your expectations. Did that get any appreciably worse during the quarter? I know we've all heard about weakness in the China EV market. It'd be helpful if you, we could help us understand your exposure there and if that worsened and drove, I guess, some incremental weakness during the quarter. Thank you. No, what we said before is we think our inventory control in auto is much less than the inventory control in IoT. That's what we said. We didn't say auto was not impacted. We definitely see several customers got impacted, but not as bad as IoT space. From that point of view, I think, we still think that I still expect that when the inventory correction finish, the auto should go back to the growth. Got it. Thank you. Thank you. Mr. Yang, if you would, could press star one again, we'll open your line to see if you can be heard this time, if you have better signal. All right, one moment. Mr. Yang, your line is now open. Hi, sorry about my technical issue. Can you hear me now? Yep. Yes. I have a question on CV72. Do you expect your automotive and IoT customers to, most of them, to opt and adopt the Oculii integration that comes with CV72? That's a good question. I think for the IoT, the adoption of a radar system will be slower because the whole market, the IoT market, is moving toward to radar, but not as fast as auto. Radar in auto space is basically, you know, everywhere. Everybody realized that they need to have a radar solution in any level two plus systems. I think in terms of adoption, the radar will go to auto space first. For CV72AQ, I think the radar integration will come later, because right now we're focusing on winning the video side. However, as the second phase of software development, auto radar integration will come also. Got it. Thank you, Fermi. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Dr. Fermi Wang for any further remarks. Thank you very much for you, to joining us today, and looking forward to talk to you next quarter. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day!