Ambarella Inc (AMBA) Q3 2023 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Ambarella Third Quarter Fiscal Year Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. And we ask that you ask one question and one follow-up question. Please be advised that today's conference is being recorded. I would like to turn the conference over to your speaker, Louis Gerhardy. Please go ahead, sir.

Thank you, Lisa. Good afternoon and thank you for joining our third 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 primary purpose of today's call is to provide you with information regarding the results for our third 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 are 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 on Form 10-K that we filed on April 1, 2022 for fiscal year 2022 ending January 31, 2022 and the Form 10-Q filed on September 8, 2022 for the second quarter of our fiscal year 2023. Access to our third quarter, fiscal 2023, 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 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. Q3 was mostly as expected. While there are material headwinds from an industry-wide semiconductor cyclical downturn, there is no change in our very favorable secular growth outlook for the opportunity enabled by our edge AI endpoint investments. During Q3, in four key ways, we demonstrated significant progress to develop these opportunities. First of all, our positive market development momentum continues, highlighted by the November 18th announcement from Continental AG that after a multi-year evaluation, they became the first to integrate our CV3 SoCs into their ADAS product line-up. Second, our six-year automotive revenue is $2.3 billion, an increase of about 28% from the $1.8 billion announced a year ago with approximately $800 million in won business. This funnel is predominantly driven by our computer vision and domain controller SoCs, and it is important to note our automotive SAM over the same period is still 10 times the size of this new automotive funnel, so there is plenty of headroom for share gains. Third, our content in our customers’ products continues to rise as we leverage our historical success with optimized processing for high bandwidth sensing. This is demonstrated by a total blended SoC ASP we estimate will increase by about 20% this year. Furthermore, we expect our new SoCs, like CV5 and CV3 to command significantly higher ASPs. Fourth, we are on track to reach our goal for CV to be 45% of our total revenue this year, and with a strong Q4 CV run-rate, CV revenue is expected to post strong growth in fiscal 2024 and become a larger portion of our mix. Now I will provide some examples of our market development activity. On November 18th, German automotive tier 1, Continental, announced that it will offer Advanced Driver Assistance Systems based on our CV3 AI domain controller SoC family. Our high-performance, power-efficient and scalable SoC portfolio, built for ADAS and autonomous applications, complements Continental’s solutions for assisted driving and further advances vehicle automation. The joint solution, with its centralized, single-chip architecture, enables the next generation of vehicles to more quickly perceive environmental conditions by processing multiple sensor inputs simultaneously. Supported sensing modalities include high-resolution cameras, radars and lidars, as well as ultrasonic sensors. Our integrated SoC enables the early fusion of raw sensor inputs, wherein the data from different sensors is combined for advanced vehicle automation. The high scalability of our CV3 SoC family allows vehicle manufacturers to choose the optimal performance level for their system requirements, while using the same vehicle architecture. Additionally, this joint solution’s low power consumption reduces cooling requirements, making sustainable energy savings possible, while also reducing system costs. Continental’s ADAS solutions with integrated Ambarella SoCs will be showcased for the first time at CES 2023 in Las Vegas. Also during the quarter, we announced another win in Japan with Toyota who began shipping its Yaris and Yaris Cross models, featuring a Gentex auto-dimming mirror with integrated digital video recorder. Based on Ambarella’s A12 automotive SoC, the dual channel video recorder features both front and rear facing cameras as well as an app that allows consumers to pull recorded video directly to their phones. Mercedes Benz began shipment of vehicles in China and Korea with a car recorder from Korean tier 1 supplier Mobile Appliance. Based on Ambarella’s H22, the car recorder includes both an ultra-HD front camera and a QHD rear camera. In November we announced that China-based INVO Tech is in mass production with a driver and occupant monitoring system that is being delivered to GAC for inclusion in its Emkoo SUVs. This system uses a single CV25AQ AI SoC, and integrates one 2 megapixel driver monitoring camera and three 2 megapixel occupancy monitoring cameras. I am also pleased to announce that our CV25 automotive AI SoC has been chosen for a driver monitoring application at a major Korean automotive OEM, with production expected to begin in 2023. The CV25 was chosen for its highly efficient neural network processing combined with very low power consumption. I will now talk about some of our customer developments in the IoT space, starting with the enterprise security camera market. During the quarter Verkada announced its first multi-sensor camera, the CH52-E, which uses four Ambarella CV25S AI vision SoCs. The camera includes four independent 5 megapixel sensors to offer customers the wide coverage benefits of a fisheye camera along with the high-resolution, high image clarity of a dome camera. Motorola Solutions has made a number of acquisitions of video security companies over the last two years, with many using Ambarella SoCs. At the GSX security show in September, Motorola announced its new AVA Flex camera based on Ambarella’s CVflow AI vision SoCs. The AVA Flex includes Wi-Fi connectivity and cloud-based video management for ease of deployment, while supporting AI features such as occupancy counting and anomaly detection. Also at the GSX show, Korean security leader Hanwha Techwin introduced multiple cameras based on Ambarella’s CV2 AI vision SoCs, including new P series dome cameras with dual 6 megapixel imagers and AI features and new T series cameras including vandal proof and bispectrum AI thermal models. Other Korea-based customers introducing new models during the quarter included IDIS introducing new cameras for license plate recognition based on our CV28 entry level AI SoC, and Digital Watchdog introducing 5 megapixel and 4K dome models based on our CV22 AI SoCs. In September, Xiaomi launched its latest battery-powered smart door lock featuring 3D structured-light facial recognition. The smart lock unlocks using 3D biometric facial recognition in less than one second with Ambarella’s CV28M AI vision processor performing both, the face recognition and 3D structured-light processing. The facial smart lock is also BCTC certified, which meets all security requirements for financial transactions in China. In the consumer camera category, Insta360 introduced its X3 360-degree camera. Based on Ambarella’s H22 SoC, the camera includes 5.7K active HDR video, 72 megapixel photos, and AI-based editing. We are also seeing opportunities in next generation AI featured video conferencing applications, both for home and commercial use. In China, H3C introduced its Magic Hub conferencing system featuring an 8K camera and 8K large screen display. The camera is based on our CV52 AI SoC and supports ultra-wide angle video capture and advanced AI features. In the streaming camera market, Elgato, a unit of Corsair, introduced its Facecam Pro based on our H2 video processor. The Facecam Pro features 4Kp60 video and advanced features such as pan tilt zoom making it ideal for gaming applications as well as solo and group video conferencing. Ambarella is also in the process of strengthening its ecosystem of design and development partners to address new markets and expand our customer base. In November, we announced a comprehensive relationship with eInfochips, an Arrow Electronics company, to expand design and development services for the next generation of CVflow-based AI cameras. This leverages eInfochips’ extensive engineering experience and resources to support the rapid growth of AI IoT applications, including those in robotics, access control, video conferencing and healthcare markets. These representative engagements, a majority of which are based on our higher value CV SoCs, provide insight into the early and continued success of our strategy. In Q4 alone we expect to ship about 2 million units of CV2 family SoCs, and the outlook for the CV2 family remains very positive. Now with CV3 and CV5 we are establishing new CV product cycles building upon our proven CV2 family and further expanding the functionality and value or ASP we can earn. Continental was early and the first to validate this new CV trend from Ambarella, and in the next several quarters we anticipate sharing more about our customer progress. CV3, in a single SoC, synergistically ties all the functionality Ambarella has established over the years; camera and radar perception, deep learning AI, and software stack IP. It began 18 years ago when we established our camera perception processing reputation, and we are now addressing higher value edge AI opportunities, serving megatrends such as security, safety and automation. These machine sensing opportunities are incremental, and much larger than the human viewing market. So, we see a very favorable secular opportunity in place, we have the right strategy to address it, and we are continuing to demonstrate early signs of success. We intend to continue to invest a majority of our R&D to fully realize these market opportunities leveraging our leadership position in the AI endpoint market.

Thanks Fermi. I’ll review the financial highlights for our fiscal third quarter and provide a financial outlook for our fourth quarter, ending on January 31, 2023. I will 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 Q3 was $83.1 million, in line with the mid-point of our prior guidance range, up 3% from the prior quarter and down 10% year-over-year. Both IoT and Auto product revenue increased sequentially. Kitting issue constraints improved. However, customer inventory reduction actions resulted in sub-seasonal revenue results as we had expected. Non-GAAP gross margin for fiscal Q3 was 63.5%, in line with our prior guidance range of 63% to 64%. Non-GAAP operating expense for the third quarter was $43.5 million, a decrease of 1% from the prior quarter and below our prior guidance range of $44 million to $46 million. The lower than forecasted OpEx was aided by favorable FX impacts on our foreign spending. Q3 net interest and other income was $1.4 million comprised of approximately $800,000 of interest income plus $600,000 of other income. Our non-GAAP tax provision was $1.2 million, or 11.4% of pretax income. This was higher than our original forecast and typical range, primarily due to taxable FX gains in foreign jurisdictions. We reported non-GAAP net income of $9.5 million or $0.24 per diluted share. Now I’ll turn to our balance sheet and Cash Flow. Fiscal Q3 cash and marketable securities increased $1 million to $199 million. DSO increased from 43 to 54 days, driven by the timing of revenue shipments, and days of inventory decreased from 125 to 124. Cash from operations was $6 million and capital expenditures for tangible and intangible assets were $5 million. Free cash flow, defined as cash from operations less CapEx, was $1 million. Free cash flow on a trailing four-quarter basis was 12.5%. We had two logistics and ODM companies represent 10% or more of our revenue in Q3. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 62% of revenue. Chicony an ODM who manufactures for multiple IoT customers was 11% of revenue. I will now discuss the outlook for the fourth quarter of fiscal year 2023. Q4 is typically seasonally slow, down in the high single digits sequentially, but this year the alleviation of some supply constraints is releasing pent-up demand, which we expect to enable our revenue to remain approximately flat sequentially, in the range of $81 million to $85 million. Looking into next fiscal year, industry-wide component availability is anticipated to improve further, and as our lead times to customers continue to contract toward normal levels, we expect customers to continue reducing the amount of inventory they’re willing to carry. Macroeconomic concerns are also rising at our customers. Considering these cyclical and macro inputs, we anticipate our fiscal 2024 Q1 revenue to be down more than our normal seasonality would suggest. Back to our fiscal Q4 outlook, we expect non-GAAP gross margin to be between 63% and 64%, flat to the prior quarter. We expect non-GAAP OpEx in the fourth quarter to be in the range of $46 million to $49 million, with the increase compared to Q3, driven by the continued build out of new advanced CV3 SoCs and CES marketing activities. We estimate net interest and other income to be approximately $700,000, our non-GAAP tax rate to be in the range of 5% to 10% and our diluted share count to be approximately 39.5 million shares. Ambarella will be participating in Arete’s Future Series Technology Conference on December 5th, NASDAQ’s London Investor Conference on December 6th, Imperial Capital’s Security Investor Conference on December 15th, and Needham’s Growth Conference on January 10th. Sell-side analysts are also offering small group tours of our CES demos between January 4th and January 7th in Las Vegas. Please contact us for more details. Thank you for joining our call today, and with that, I will turn the call over to the operator for Q&A.

First of all, Fermi, congratulations to you and the entire team on the Continental deal. I would like to ask for some details on how that came about. It appears that even in your pre-silicon simulation results, they had been assessing the CV3 platform for some time, and they were certainly among the early customers sampling CV3. Could you perhaps explain how you transitioned from simulated performance and power capabilities for CV3 to actual sample products and the subsequent press release, along with the scope of potential wins with Continental? Additionally, regarding the details, you mentioned that your automotive funnel increased by 28%, from $600 million to $800 million, driven by one business. How is the Continental deal and any potential customer wins from that relationship factored into the updates to your automotive funnel?

Thank you for your question. We have been collaborating with Continental for a considerable time, even prior to the production of our first-generation CV2. This has been a lengthy process since demonstrating the performance and power efficiency of CV2 can be challenging without physical silicon. With CV2, we showcased the efficiency of our architecture and fulfilled our commitments. While CV2 is suitable for Level 2 automotive applications, Level 2 plus and Level 3 will require a more powerful chip like CV3. We began discussions about CV3 around two years ago using just a PowerPoint presentation and simulations. Now that we have CV2 silicon, we can convincingly demonstrate the performance and power efficiency of our CV3 chip along with our simulations. The breakthrough with Continental occurred when we provided samples of our CV3 chip and development platform, allowing them to verify our performance claims. This convinced them to proceed with our partnership. Another factor is that we offer a comprehensive solution that ranges from driver monitoring assistance to electronic mirrors, covering everything from Level 2 to Level 3 with a unified software platform. Our ability to provide a complete roadmap appealed to Continental, helping us secure this deal. As Louis mentioned, we are optimistic about further business development and anticipate providing updates on our CVC business in the upcoming quarter. Regarding potential design wins, I will defer to Continental to comment on that, but I believe their reputation and credibility with OEM customers will facilitate design wins and positively impact our sales funnel in the near future.

I just wanted to clarify my first question and then follow up with Brian. To clarify, you increased the automotive revenue six-year forecast from $1.8 billion to $2.3 billion and the one business from $600 million to $800 million. Is the Continental relationship included in both of these figures, or just one of them? I'm trying to understand what you assume regarding the funnel related to that relationship. Did it change significantly when the deal was announced? Also, Brian, you mentioned potentially underperforming compared to normal seasonality as we approach fiscal Q1. The past couple of years have been quite unusual seasonally for the entire semiconductor industry due to shortages and various other factors. Could you provide some clarity on what you consider to be normal seasonality for fiscal Q1?

I will address the first question and ask Brian to handle the second. The first question relates to Continental's role in the two numbers. I believe that Continental's contribution to our current funnel is minimal, although there are some instances. However, we anticipate that the impact from Continental will begin to manifest in the next funnel next year. Additionally, we do not yet see any contribution from Continental in one specific business.

And related to your question on normal seasonality in Q1, of course, normal is difficult to define. But the way we looked at it is taking a five-year average. And in that case, the five-year average for Q1 would be a sequential decrease of 4%. And so, as we sit here today, we think that the decrease going into Q1 will be greater than that number. We don't have perfect visibility at this point to what it will be, but we want to provide as much outlook as we can at this time.

Maybe to follow up on the funnel discussion. You announced a couple of pretty meaningful driver monitoring wins, and e-mirror win as well. So, how should we think about framing it as the interior contribution to the auto funnel versus say the ADAS and autonomous contribution to that funnel growth?

So, first of all, as you can see, for those kinds of design wins, the design cycle is much shorter than ADAS because they are not really safety sensitive. So, for ADAS projects, we usually look at, in China, more than a two-year development, outside China up to a four-year development. For this kind of internal design, usually, you can think about a 12- to 18-month cycle that you can get into production. So that's why you start seeing more of those design wins. And that's definitely an area that we want to have really high market share, and that's what we are doing. But that doesn't mean we don't focus on ADAS. In fact, on the contrary, I believe that we are doing well with ADAS as well as Level 2 plus. And hopefully, we can give you more design win activity in the future.

Okay. Got it. Thank you. And maybe a quick follow-up to your point, on kind of the timeline of adoption, and specific to Continental, very early days, as you demonstrate with them to customers. But any early thoughts on timeline to eventual revenue contribution with this partnership? Are you seeing OEMs push to accelerate development to integration and production timeline faster in ADAS and autonomous as well?

Well, first of all, I will leave Continental to answer the potential revenue that they can generate with this relationship. But like we said before, any CV3 design win will take three to four years to get to revenue. And I don't think the timeline has changed.

Could you discuss how quickly the funnel can begin generating revenue? You mentioned a timeline of about six years, which I assume is mostly back-end loaded since the number is significantly larger than what you're currently shipping. Can you provide insight into the speed at which this revenue can start coming in? Additionally, I'm curious about how much of this should still be viewed as a probability-weighted event.

So, the methodology behind the funnel and how we discount both the one and pipeline didn't change from our prior practice. And with regards to the distribution of the revenue through the six years of the funnel, it's not linear, as you can imagine. It's exponential in shape where the sixth year is much higher than the first year. And the reason for that would be the time to revenue that Fermi was just describing in a prior question, but it's also very significantly driven by increased penetration rates of these new technologies. And then most importantly, it's actually the higher ASP of the products that we'll be selling in each of these six years. For example, CV3 contributes revenue in years 5 and 6 like we expect, the ASP per chip is much higher than it would be for, say, a DMS, CMS win with a CV25 product. So, those are the factors that cause it to be exponential in shape, not linear.

This is Jeremy Kwan calling on behalf of Tore from Stifel. I guess, maybe a question first on the ASPs. Can you give us any more color in terms of where they stand today? And I understand that once CV3 starts contributing, that's going to grow up even more significantly. But can you help us just give us more details on where they are today and where you see that? And when you said it's going to grow 20% this year, is that for the fiscal year or...

Yes. I think the comment is for this fiscal year. It was at high single digits, and now I think it's above $10 ASP right now. And the major contribution comes from the increased sales of our computer vision chip. And in fact, that's probably the biggest item which helps us to continue to get a higher ASP. Now with the CV5 really getting into a ramp-up in production and we start sampling CV3, I also expect that our ASP will continue to trend upward.

Sure. We're still bottoming out on our OpEx budget for next fiscal year. But I guess, the way I would think about it at this point is consider the exit velocity of our guidance for fiscal Q4, which at the midpoint was about $47.5 million. Going into next fiscal year, we're going to have additional chips in development that would cause that number to increase. So, you've got two things to consider. Number one, OpEx has been increasing throughout fiscal '23. And so, even if OpEx remained flat at the Q4 forecast level, it would be up on a year-over-year basis. And then, in addition to that, we'll have some additional spending requirements. That's about what I could give you at this point. In next quarter's call, I think we can provide some more insight.

Congratulations on the Continental win. And on the Continental win, are there expectations for them to use the scalability of CV3? Will they have a low end solution and the high end, or maybe three different solutions?

Yes. First of all, thank you. And also, I believe your read is right. In fact, in their press release, they talk about one of the reasons they chose the CV3 family is because they can use a software structure to apply it from low-end to high-end product line.

I see. Is the Oculii or Ambarella radar solution included in the overall design, or is it still to be determined?

In the press release, we didn't discuss radar. So, we will provide more updates when we are able to talk about the potential radar collaborations.

I had a follow-up question on the Continental win and, again, congratulations on that. If you could just expand a little bit on sort of how the sales strategy works there? Because obviously, you're providing some functionalities but obviously, maybe some other companies will provide others. So, is this like a full reference platform that Continental is offering? If you could just add a little bit of context on how you go to market, specifically with all the parts that are part of that particular solution?

Yes. First of all, CV3 will be the domain controller for the system that we are talking to Continental about. And the goal is that there is no other major processing chips on that system. But the CV3 will take in multiple different sensor modalities and perform not only just the perception, but also all the higher-level software functions that the software is provided by Continental. Using CV3 in robotic applications is a key strategy for Ambarella. As a small company with limited resources, we must focus on strategic accounts. In the automotive sector, Continental is our primary partner, and we have a few others. In robotics, our strategy targets customers who already have products in the market and require high-performance chips like those in the CV3 family, regardless of whether they are high-end or low-end. Many robots currently utilize multiple processing chips, and there is potential to use a domain controller like CV3 to integrate various functions, enhancing cost efficiency, system design, and overall efficiency. This is definitely a market we plan to pursue further.

Yes, Tore, it's Louis. I'll just add. It's a good question because global robotics applications are not part of our automotive funnel, so that is something that's separate and not reflected in that funnel we've communicated.

I want to congratulate you on the Continental win. I have a quick question for Fermi. You mentioned this in response to Tore's question earlier. Regarding the software development needed to bring CV3 into production, how much of that responsibility falls on Continental and its customers versus Ambarella? It seems like it might be primarily Continental's responsibility. If that's the case, will there be additional efforts required for each customer that adopts CV3 in the future, or will there be some advantages from the initial success?

First of all, I believe our role in this partnership is as a strategic tier 2 to Continental, where we are providing support, one of which involves porting their software onto our CV3. We have been discussing this strategy for many years, and we feel we are the ones truly focused on this business model compared to our competitors. It's really about establishing a team dedicated to helping our customers port software, which has been included in our headcount planning as well as our engineering development. This is not a concern for us, and we anticipate needing to continue offering this type of service to all potential customers.

Okay. That helps, Fermi. And then a question for Brian perhaps. Brian, you guided the first quarter next year as well as this year. Are there lingering supply chain post constraint issues factored into your below seasonal guidance for Q1, or are those kind of behind us at that point? Is that purely a statement about softening demand?

So, we think that those supply chain issues are, for the most part, behind us, and that's something that we don't anticipate to impact our Q1 revenue significantly. What we do see is continued shortening lead times and a desire on the part of customers to reduce inventory levels. So, that's really the impact that we're contemplating as we think about Q1 at this point.

Great. One from my side on the CV penetration. Fermi, you mentioned or reiterated 45% for this year. Just wondering, can you give us any update on what the exit run rate of this year would be to kind of baseline for next year? And I have a follow-up.

Yes. David, we haven't disclosed the run rate as well as the next year's forecast. But I can say that we expect the CV to continue to become a bigger portion of our total revenue for many reasons. One is that they are enabling new markets; the other one is their new ASPs. Of course, that portion of our CV growth comes from replacing our existing video processor business. But I think that I'm very excited about the new application that we talk about that our previous video processor chip cannot address. And particularly CV3 and CV5 opportunity we're talking about today is really a new opportunity we can address.

Thank you for that information. As a follow-up, Brian, regarding the sub-seasonal Q1, you mentioned inventory and decreased customers. Should we anticipate that by the end of Q1, the inventory you are observing and the issues with customers will be resolved?

That's a great question. I think it's one that we don't have great visibility to. So I'm not going to speculate on that. We certainly, in the near term, anticipate that there will be impacts within that time period, and that's why we want to provide some visibility. But in terms of when things bottom and so on and when those issues go away, I don't think we have a good feel for that at this point.

Maybe I'll ask a question on the IoT side of the business here. Maybe Fermi, if you can talk bigger picture here over the last year, how the penetration of CV has gone into maybe both sides of the security business? And where do you think that will go over the next year or two, to be a great perspective over that time? Thanks.

That's a great question. We continue to see strong IoT design wins across all markets, including professional and consumer security among others. As I mentioned earlier, this is driven by new applications. For instance, Xiaomi has introduced a new lock that uses 3D metrics for face identification. We're also discussing other applications like video conferencing, which is a new market made possible by our CV product line. Overall, in the IoT space outside of China, we're performing quite well. However, I want to emphasize that due to new U.S. regulations, we have virtually no presence in China, particularly in the security camera sector. I want to stress that this will result in zero revenue for us in that area next year.

Okay. Perfect. Thanks for that update. My second question is on Continental here. Looking at it from one angle, and you mentioned both today and in past calls regarding having a solution that really addresses all vision-related opportunities, both within and without the car here. As I look through the Continental press release from whatever, a week or two ago, I didn't see any mention of kind of indoor use cases there, and maybe I've scanned too quickly. But is that being contemplated here? Is that something you can discuss, and/or do you see other OEMs coming through the funnel here that you will have both, interior and external use cases because you have that full offering, others don't?

For the Continental press release, the focus was primarily on one application, which is ADAS, intended for external use. However, I believe they recognize that we provide a comprehensive roadmap that includes both external and internal applications. It's important to note that the press release is concentrated on just one application and one potential opportunity between Continental and us.

This is DJ Sebastian on behalf of Ross Seymore. First off, thanks for letting me ask a question here. But I was just hoping to get some color on sort of the revenue split between your IoT and auto segments, both for the reported quarter and the implied guide. Thanks.

The approximate split would be about 75% IoT versus 25% automotive.

Cool. And just a quick follow-up. How should we sort of think about that going into next year? I mean, do you guys see that dynamic changing significantly, or are we still going to write sort of the same split for the foreseeable future?

Well, like I said, we haven't given any guidance for next year. But like I said, we expect the automotive percentage will continue to increase because of the funnel that we're building. And that should be the trend which we are expecting.

Thank you for your question. And that concludes today's Q&A session. I would like to turn the call over to Dr. Fermi Wang for closing remarks. Go ahead, sir.

Thank you. And thank you all for your time and consideration. We hope to see you at CES or one of the other coming events. Thank you, and goodbye.

This concludes today's conference call. You all may hang up, and everyone have a great rest of your day.