Operator
Good day, and thank you for standing by. Welcome to the Umbrella Fourth Quarter and Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you. Your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Louis Kierhardi, Vice President, Corporate Development. Please go ahead, sir.
Thank you, Michelle, and good afternoon. Thank you for joining our fourth quarter fiscal year 2026 financial results conference call. On the call with me today is Dr. Fermi Wong, President and CEO, and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our fourth quarter of fiscal year 2026. 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 based on currently available information and subject to risk, uncertainties, and assumptions. Should any of Should 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. Access to our fourth quarter fiscal year 2026 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. The content of today's call, as well as the materials posted on our website, are Amborella's property and cannot be reproduced or transcribed without our prior written consent. Before starting the call, we hope to see you at one of the following investor events scheduled for our first quarter of fiscal year 2027. March 3rd, we'll be at Morgan Stanley's TMT Conference in San Francisco. March 10th, at Loop Capital's 7th Annual Investor Conference in New York. March 10th to 12th, we'll be at Embedded World in Nuremberg, Germany, and we're offering a limited number of investor meetings. March 11th at Cantor's Global Technology and Industrial Conference in New York. We'll be hosting bus tours at our Santa Clara headquarters with Instanet Nomura, Poitier, CLSA on March 12th, 18th, and 20th, respectively. March 16th at Bank of America's 2026 Asia Tech Conference in Taipei, and March 24th at the Roth Conference. Dana Point. As a reminder, we'll enter our first quarter quiet period on April 16, 2026. Fermi will now provide a business update for the quarter. John will review the financial results in Outlook and then we'll be available for your questions. Fermi?
Thank you, Louis, and a good afternoon. Thank you for joining us our call today. Fiscal 2026 established a new revenue record for Embrella. Revenue increased 37% year-over-year, well above the growth in the overall semiconductor industry and most of our semiconductor company peers. Our 5 nanometer new product cycles, together with our customers' new product launches, combine to drive 50% year-over-year growth in our Age AI revenue. About 80% of full-year fiscal 2026 revenue is Age AI, all of which is also defined as a fiscal AI. Overall, auto and IoT revenue both grew with company-wide growth in both unit shift and the averaging selling price. Our fourth quarter revenue results follow a seasonal pattern with revenue down 7% sequentially, slightly above the midpoint of our original guidance. Our new third-generation 5-nanometer CV75 and the CV72 AI SOCs are rapidly growing, reaching a high single-digit percent of total revenue in Q4, and these new products are poised to be an important source of incremental revenue in the new year. Looking further into fiscal 2027, we anticipate total revenue growth in the 10% to 15% range, with non-GAAP gross margin within our long-term model over 59% to 62%. For the year, we expect our new product cycle to continue to drive both units and the average selling price increase, with revenue growth in both auto and IoT. In addition to the anticipated revenue ramp from CV75 and CV72, the recently announced CV7, our first 4nm chip, is expected to begin to generate revenue in the fourth quarter of this year. By a variety of majors, our team's achievements in the last year have strengthened our age AI leadership, and we continue to enhance our market position. Financially, in fiscal year 2026, we continue to commercialize our AI investment and deliver premium revenue growth, returning to full-year non-GAAP profitability. Fiscal 2026 was our 17th consecutive year of a positive free cash flow, with free cash flow for the year of $58 million, or 15% of revenue. We executed to both our operational and R&D priorities. While facing a variety of industry-wide supply chain constraints, we shipped more than 25 million units across more than 15 SOCs with many variants, and we tape out our first full nanometer chip and our first two nanometer gate-overrun AI SOCs, while successfully bringing CV75 and the CV72 mass commercialization. Our Cooper development platform, while already powerful and well-established, is in a constant state of enhancement including new agentic capabilities strategically we announced during our ces 2026 product and technology briefing we are augmenting our direct to customer go-to-market with incremental initiatives we expect to materially contribute to our long-term revenue growth First, we are incrementally building an indirect sales channel including independent software developers, distributors, and the system integrators. We expect this to improve our ability to address the edge infrastructure market as well as the highly fragmented robotic market. Furthermore, in the long run, our existing portfolio should benefit with long-tailed revenue from small to mid-sized customers we have not directly supported in the past. The second strategy development is the establishment of a semi-customer, semi-customer slash custom ASIC business, where we have strong interest from a variety of companies. Our deep intellectual property, perception engines, AI accelerators, software development platforms, and advanced VRSI capabilities, and established positions in the age AI market are increasingly valued by companies considering semi-custom or custom ASIC projects. Stepping back for a minute, there continue to be significant industry development with AI agents, applications, content, models, and the services that, when combined without of enabling AI SOCs create an environment where more age and physical AI use cases can practically emerge. Techniques developed in the industry such as distillation and the mixture of experts are enabling age models to become smaller yet smarter, which we expect will enable applications to evolve from early adopters to the mainstream. Altogether, we see a variety of enterprise and the consumer-age AI system become real-time, proactive, and able to make close-loop decisions autonomously for the end users through agentics. Of course, with all the breakthroughs, our customers have a lot to learn and evaluate as they consider new AI business cases. The various components of our comprehensive Cooper development platform together with our engineering support are enabling customers to implement new technologies. For example, a power constraint application may need a hybrid AI workload split between cloud and edge. But in other cases where no latency is acceptable, we need to support a vast majority of AI processing on our silicon. Overall, you can see there are many different age AI applications, use cases, and the tradeoffs we must support. And our broad age AI products portfolios and established powerful development platforms are must-haves to drive the proliferation and diversification of the age and the physical AI market. I will now discuss some representative customer engagement during the quarter. I want to start by highlighting our industrial automation robotic design wing as the warehouses of a large U.S.-based e-commerce provider. They leverage our N1655 AI SOC to develop a perception hub for the warehouse floor. A fleet of this system is being deployed to enable a high-speed, accurate, and efficient storage and retrieval system at their large-scale warehouses across the country. We are seeing several such physical AI designs starting to emerge on our SOCs. In other IoT applications, we were awarded several projects in the video conference market this quarter. Insta360 launched their Link2 Pro and Link2C Pro high-end web camera base on our H22-ASLC. And the QSC, a cloud-native audio, video, and control ecosystem company based in California, announced their QSYS high-division video conferencing PTZ camera designed on our CV72-ASLC. They are leveraging our ISP for enhanced video quality and use AI for face detection and intelligent presenter tracking. In enterprise security, IDIS, a leading security technology customer, announced their DCD-3168 security camera based on our CV72-SOC. And our customer, Delmeyer, based in Germany, launched their Domera RDF6140 Dome camera based on CV25 this quarter. They leveraged our AI accelerator to offer several AI features like motion detection, temper detection, intrusion detection, and the line crossing. Finally, one of our leading customers, IQsight, previously known as Bosch, announced two new AI products, both based on CV72. The Flexidone 7100i anonymized the image inside the camera for enhanced privacy and compliance. And the delineant 7100i detects people and the vehicle accurately with maximum detail in dark, low-light conditions. And in our automotive safety ADAS and telematic business, I would like to share some key customer wins during the quarter. Ford recently launched the DealerFit truck bed camera last quarter. It's a smart security camera for the truck bed built on our CV25. It provides real-time truck bed monitoring, leveraging AI-powered intrusion monitoring and threat detection. Thinkware system in South Korea launched their QFD2 in-card digital video recorder system, which is the first of the kind to leverage our AI-ISP neural network on our CV25 SOC. Thinkware also used Ambarella's ADAS SuperStat to enhance perception capability for their forward-facing ADAS. Garmin announced their innovative dual-view based on CV25. It's a rugged two-camera system that enables professional truck drivers an edge in situational awareness. In summary, these 11 representative customer engagements represent the implementation of a wide variety of applications and the AI workload. Inherent in these wings is the high degree of programmability and flexibility in our ASOC and software platform, enabling us to serve a wide variety of applications with minimal incremental investment, while the customer benefits by having the ability to reuse their software and scale. While we are seeing age AI green shoes emerging in a very diverse range of age applications, we currently see the largest long-term growth opportunities in the robotics, automotive, and age infrastructure markets. The robotic market is a diverse market in a variety of occasions, fixed factory automation, humanoid, mobile terrestrial aerial drones, and more. we are already shipping into the fixed factory automation market and Q4 was our first full quarter of a production revenue from the aerial drone market which we believe is one of the highest value mobile robotic market today with our industrial automation robotic engagement announced announced today we are establishing ourselves in yet another form factor in the diverse and nascent robotic market. In the automotive market, we have two business. One safety telematics ADAS business, which represents most our revenue and a majority of our near-term growth opportunity in autos. And also our auto autonomous business, starting at the level two plus, which offers long-term growth opportunity. At this time, the auto opportunities we have either won or being invited to bid upon in the next six years, from fiscal year 2027 to fiscal year 2032, is approximately $13 billion, with the one proportion similar to the last year. In the age infrastructure market, we are observing early customer opportunity with two different design architectures, one physical AI and the second digital AI. First, enterprise buyers want to run physical AI inference on a local edge gateway to aggregate multimodal data from multiple sensors pre-processing it in real time for use cases such as fleet management, physical security, industrial robots. The typically designed fully self-efficient agile solutions to process data locally on devices for real-time, low latency, and secure decision-making that can be summarized and sent to data centers for training and analytics. Second, we see early customer opportunities from enterprise IT buyers for digital AI application that push centrally trained and high-capacity models to be distilled, quantized, and deployed in edge nodes to enable low-latency, closed-loop automation for secure digital AI application while still maintaining centralized control in the cloud. In summary, we are an H-AI market leader across a broad set of criteria. First is our credibility. We have an install base of 42 million H-AI SOCs with more than 370 unique customer products reaching production and approximately $1 billion in cumulative H-AI revenue primarily from our second-generation CV2 family. Next is our portfolio breadth. We have 12 H-AI SOCs supporting models ranging up to 34 billion parameters with support up to 100 billion parameters in the future, covering the full breadth of H-AI applications. Finally, our development platform is an established and critical enablement tool. The Cooper development platform scales across our HGI portfolio and the multiple applications with customer implementing and reaching production with more than 200 different model architectures. In conclusion, I am very proud of the resilience, commitment, and execution of our team in the last year. I'm very excited about our prospect in fiscal 27 and the years ahead. we are committed to our AGE-AI strategy and driving earnings growth. With that, John will now discuss the Q4 and fiscal year 2026 results, as well as the first quarter outlook in more detail. John?
Thanks, Fermi. I'll now review the financial highlights for the fourth quarter, fiscal year 2026, ending January 31st, 2026. I will also provide a financial outlook for our first quarter of fiscal year 2027, ending April 30th, 2026. 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 and acquisition-related expenses adjusted for the impact of taxes. Fiscal year 2026 revenue increased 37.2% to $390.7 million. Automotive revenue led by telematics increased in the high single digits and IoT increased almost 50% year over year, led by portable video and a continuation of strong growth in physical security. For fiscal year 2026, non-GAAP gross margin was 60.7% versus 62.7% in fiscal 2025. Non-GAAP operating expense increased 12.9% for the year versus 6.5% in the prior year, driven by higher costs related to employees and SOC development projects. Ending cash and marketable securities total $312.6 million, dollars, up from $250.3 million at the end of the prior year, driven by free cash flow of $58 million for the year, or 14.8% of revenue. For fiscal Q4, revenue was $100.9 million, slightly above the midpoint of our prior guidance range of $97 to $103 million, down 7% from the prior quarter and up 20.1% year-over-year. Sequentially, automotive and IoT both experienced a similar seasonal decline. Non-GAAP gross margin for fiscal Q4 was 59.8% at the midpoint of our prior guidance range of 59 to 60.5%. Non-GAAP operating expense in Q4 was $56.5 million, also at the midpoint of our prior guidance range of $55 to $58 million. dollars. Q4 net interest and other income was 2.3 million dollars. Q4 non-GAAP tax provision was approximately $551,000 and we reported a non-GAAP net profit of 5.5 million dollars or 13 cents per diluted share in Q4. Now I will turn to our balance sheet and cash flow. Fiscal Q4 cash and marketable securities reached 312.6 million dollars, increasing 17.3 million dollars from the prior quarter and 62.3 million dollars from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables day sales outstanding of 36 in Q4 was flat with the prior quarter. Days of inventory increased from 76 days to 99 days to support our current level of business. Operating cash inflow was $18.9 million for the quarter and $73.5 million for the year. Capital expenditures for tangible and intangible assets were $3.9 million for the quarter and $15.5 million for the year. Free cash flow was $15 million for the quarter. During the second quarter of fiscal year 2026, Ambrella's Board of Directors approved an extension of the current share repurchase program for an additional 12 months ending June 30, 2026. In the fourth quarter of fiscal year 2026, the company did not repurchase shares. During the first quarter, we repurchased 24,152 shares of our stock for total consideration of $1 million. As of today, there's approximately $48 million available under our repurchase authorization. We had one logistics company representing 10% or more of our revenue. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 73.1% of revenue for the fourth quarter and 69.7% for the year. I now will discuss the outlook for the first quarter of fiscal year 2027. We forecast Q1 revenue to be seasonal and in the range of $97 to $103 million or $100 million at the midpoint. sequentially auto revenue is expected to increase with iot revenue expected to be seasonally down we expect fiscal q1 non-gap gross margin to be in the range of 59 to 60 and a half percent we expect non-gap opex in the first quarter to be in the range of 55 to 58 million dollars we estimate net interest and other income to be approximately two million dollars our non-GAAP tax expense to be approximately $800,000, and our diluted share count to be approximately 44.1 million shares. Thank you for joining our call today. And with that, I will turn the call over to the operator for questions.
Operator
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question to one follow-up. Well, one moment while we compile our Q&A roster. Our first question will come from the line of Quinn Bolton with Needham & Co. Your line is open. Please go ahead.
Hey, guys. Congratulations on the next results. For me, I wanted to ask for maybe a little bit more detail on the e-commerce warehouse robotics win that you discussed in your script. Can you give us a sense, you know, is this already in production?
If not, when would you expect it to go to production and you know how how many warehouses or perhaps how many robots could you guys be um you know participating in for this for this customer is it a is it a meaningful opportunity first of all it's in production although it's a low volume production right now but we definitely expect that will continue to grow and we think it can be meaningful depends on how how wide this go to their warehouses um there in terms of the function that we're doing is really like i said it's a perception in a warehouse to help them to uh do an automation for the from the uh production and the man and also uh of the product movement um i think this is significant because that's the first such a design win for us although we are not allowed to talk about the name and also the size opportunity but we think this definitely indication that uh our perception system that have been well respected and used in this large organization.
Yeah, I imagine it could be a nice, you know, flagship customer that could lead to some other wins as well. So congratulations on that. The second question I had is you gave us sort of the update on the auto pipeline now at standing at 13 billion. I believe that that's sort of an unprobability weighted number. In the past, I think you've given us a 2.2 billion probability weighted forecast. And just wondering if you look back at the last forecast that was probability weighted, if you unweighted it, could you give us sort of an apples to apples comparison as to whether that auto pipeline has grown over the last year?
Yeah. So first of all, we call it you know automotive opportunities not just trying to differentiate what we have been doing in the last several years the so first number record is the the total size of the 19 billion dollars that's involved the all of the business opportunity that we see in the next six years that we will we have a either won or being invited to bid on and compared to last year this we do see the growth in this category on the on the one on the one business that we see uh the numbers similar to last year as an apple to apple comparison and but also i want to highlight one thing although that um the one business is flat but considering the weak automotive market in 2025 we are very happy to see the end result because that show not only we see more opportunity in the total automotive opportunity side but also we continue to add new design wins to compensate for the you know the um the for example a lot of customer cut their forecast or delay the production but we continue to maintain a healthier design wing momentum in automotive great and sorry just a clarification for me.
Did you say that the total pipeline is $1313 billion or $1919 billion?
All right. It's a $13 billion. It's a $13 billion. Sorry. It must be a game code. Okay.
I just heard that you had in the script.
So $13 billion with a total opportunity. Got it. Okay.
Operator
Thank you. And one moment for our next question. Our next question comes from the line of Tor Svanberg with Stiefel. Your line is open. Please go ahead.
Yes, thank you, and congrats on the record revenue year. For me, I was hoping you could maybe help us look for, I guess, you know, guideposts on two particular topics. One is your channel strategy. You know, how is that going? Are there certain things that we should look out for for 2027? And then on your semi-custom ASIC business, again, any specific things that we should be keeping an eye on? And what are perhaps some of the early applications you think where you would potentially get an ASIC design with?
I think at the CES, we talk about a new go-to-market strategy and also highlight several milestones we want to achieve. I think the first year, our goal for this new go-to-market strategy is to focus on build-up with our partners, particularly the ISVs as well as assistant integrator and distributors. We think that we are shooting for at least a thousand of ISVs committed to our platform by the end of the year so that they can help us to drive multiple different applications, different customers at the same time. So, you know, also we are targeting, you know, at least establish certain milestones with these filters and the system integrators, the milestone for the first year. So you should expect us to continue to make progress on that. I think that, but however, revenue probably, I'm not expecting any meaningful revenue this year from this new business model, but we expect to start seeing maybe ramping up a little bit in the next year. In terms of a custom ASIC, semi-custom ASIC business, we already talked about our first two nanometer chip is in this business model, and it's in the IoT space. And our current engagement shows multiple companies are interested in this model, and I won't be surprised that we continue to announce new design wing in this category. But, you know, so far, only the first one is being confirmed, and we only announced it. So what you should expect is when we get new design wins, we will give you a hint that we definitely win something. But maybe we won't disclose the customer name or the business, but we should give you a hint that we continue to make progress in this business model.
Very good. Thank you for that. And as my follow-up, and on the 10% to 15% growth guidance for fiscal 27, I know in fiscal 26, obviously, IoT outgrew automotive by quite a bit. You know, just wondering how you think about the mix in fiscal 27, and I assume the 10% to 15%, you know, assumes both unit growth and obviously also continuous ASP growth.
First of all, your assumption is right. both ASP and uni growth is there, and also that we believe both IoT and auto will grow. But I want to add a little bit more color on our growth rate. When we look at fiscal year 26, growth over 37, it comes from two areas. One is our new product, RenBub, at a time, and also, to our present surprise, a strong customer new product, RenBub, in fiscal year 26. like combine, generate this growth. In this year, we are very confident that we're going to continue writing down this momentum and we are confident about our own new product ramp up like CV72, CV75, and CV7. What we are trying to understand is working with customers to understand their new product ramp up and how they're going to impact our growth in this year.
Operator
Thank you. And one moment for our next question. Our next question is going to come from the line of Kevin Cassidy with Rosenblatt Securities. Your line is open.
Please go ahead. yeah thanks for taking my question and uh congratulations on the good year um just what what what are you seeing in the competitive landscape you know as you're getting into drones and you know are i guess are we past the point where custom companies are trying to build their own uh devices and will prefer to work with you uh for the ai capabilities um and just what else do you have as competition to say coming from China?
You're talking about China specifically. So, first of all, in the drone market, DGI continue to build their own silicon, but they also use external silicon solution to complement their product portfolios. And outside that, I think the majority of the other drone markets will be, they don't plan to, at least we don't know anybody plan to build their own silicon. And they definitely try to use external silicon, particularly that, you know, if you look at our offering to draw market, it's from 5 nanometer down to 4 nanometer, and then it would be 2 nanometer. And from that point of view, I think that will uniquely position us as one of the few that can provide to the Chinese market.
Great. And, you know, interesting with the ASIC market, with AMD and Meta announcing a partnership earlier this week, part of the discussion was that Meta had certain models that they want to run on a semi-custom version of AMD's MI450s. And to me, it reminded me of your design where you have algorithm-first type of application, or the way you made your CV design in the first place. So is that where you're finding applications for a semi-custom version? Is it for certain models for running what the customer is looking for in optimized SOC?
I think that's one of the areas our customer wants to leverage on. But I want to highlight most, in fact, most, in fact, all of the customers that we are engaging for this business model is trying to leverage either our CV4 AI accelerator because of performance and performance efficiency or our AI or IDSP, which is using a lot of AI performance. Third, or our software platform that they can easily leverage to quickly go to market with a new product, new models. Fourth, and also as important, is our capability to tape out a two nanometer chip. I think all customers are trying to take advantage of the combination of these four factors as the reason to talk to us. By the way, we are not targeting at all for the data center design. That is not where our strength is. Some of the customers want to build each AI associate with their own algorithm. That is where it's our sweet spot.
Okay, great. Thanks for making that clear.
Operator
Thank you. And one moment for our next question. Our next question comes from the line of Jill Moore with Morgan Stanley. Your line is open. Please go ahead.
Great. Thank you. I heard you reiterate a 69 to 62 percent long-term gross margin.
I just wonder if you need to rethink that at all with the focus on different markets, anything that would pull you out of that range one way or the other, just any color. Thank you.
So first of all, we repeat to say this year, our gross margin will be within our long-term gross margin in 59-62. And I see, yes, I also mentioned that when the custom and semi-custom ship design become more mature, if we need to change the model because of that, we will come to talk to our investor world about this. But today, I think that because that new business model is still at the early stage and we're still talking to customers for different business models. I think that's premature to talk about this in terms of gross margin for the impact for that business. For our existing, ongoing business, we will continue to feel comfortable that we'll be at this 59 to 62 percent.
Operator
Thank you. And one moment for our next question. Our next question is going to come from the line of Vivek Arya with Bank of America. Your line is open. Please go ahead.
Hi, this is Liam Farr on for Vivek. Thank you so much for taking my question. Wondering, are you seeing any or expecting any impact or benefit from the recent restrictions of a Chinese competitor in the drone market?
Well, we're definitely watching it. So definitely, I think that's something we are talking to our customer. I think that it's not clear. First of all, our current design with that only in production is not impacted by the new regulations. So whether the next generation will be impacted really depends on that they are going to file for APCC review, so there's a possibility it will be impacted. However, I want to point out that outside U.S., there's still huge drone market that we can tap into, not only in China, but in the outside U.S., that's still a very big market that we can work with. So I think overall, the answer is no direct impact right now, but we're watching the potential impact in the future.
Thank you. And then, are you seeing any impact on the overall demand environment from component cost inflation?
You're talking about DRAM, I assume. So, yes, first of all, there's obviously no direct impact to us, but we talk to a lot of customers, in fact, all of the customers about this issue. It's very clear that majority of them have concerns about the price increases rather than the shortage of the component. In fact, I think most of the company that we talk to still can find supplies, but at a much, much higher price today. So indirect impact, in fact, in my opinion, is for the product which has a very low gross margin, which cannot sustain the cost increase, what will be the impact the most? If you look at that from our customer portfolio, that means, you know, in fact, it's really low in business, which we don't have much at all. So I think from our point of view, we don't expect huge impact because of DRAN price at this point. But we remain to watch this because it changes so quickly and so dynamic, and we want to make sure that we don't overlook this potential impact.
Operator
Thank you. And as a reminder, if you would like to ask a question, please press star 1-1.
Our next question will come from the line of Martin Wang with Opco. your line is open please go ahead all right thank you for taking my question my question is on seasonality in relation to cd7 launch in the latter half the year do you think that initial launch could change for seasonal patterns a little bit and also how that could how should we think about the overall AISP update for the year versus FY26?
Right. So first of all, we expect the RAMBOB in the first quarter this year, but we don't expect material around year generated by CV7 this year. But however, we highlight CV7 because for two reasons, one is CV7 is our first full nanometer chip and 2.5x higher AI performance than CV5. So from that point of view that we see huge interest and in fact many design wins already engaged and some of them will be ramping up in production later this year is significant for us. That means that confirm our thesis that our customer has huge demand and appetite for higher AI performance for the applications which is very encouraging to us. So in terms of ASP, we expect there's a premium ASP compared to current CV5 ASP, but we haven't finalized all the negotiation yet. So I think that's just an indication. That's just an indication of what we're looking at in terms of total ASP for CV7.
Operator
Thank you. And one moment for our next question. Our next question comes from the line of Gus Richards with Northline Capital Markets. Your line is open.
Please go ahead yes thanks for taking the question um you know as you move into the ASIC business and you know an indirect channel you know I was hoping you could discuss a little bit about how that's going to change the TNL you know indirect channel you're going to have likely slower volumes higher gross margin and maybe higher SG&A to go along with that in the ASIC business um you know do get paid for the NRE um you know does that necessitate a lower unit cost or lower gross margin on the units if you just kind of talk about how you think that's going to play out over time right so first of all I think it's a little
too early for us talk about the business model for the new go-to-market strategy we definitely need to come back with to you to talk about this but considering there's no revenue generation from that this year I would like to delay that discussion a little bit. But your question on the ASIC side is important for us. First of all, it has to have an NRE associated with those kind of projects, otherwise it doesn't make sense to us to do this kind of project. But however, there are all kinds of different variables we play with. For example, some customers want to integrate their black box IP into a chip. Somebody want to have a special I.O. design for their their application so this is a huge variety of demands but at the end we need to have NRE but willing to to look at different ASP structure to make the whole overall business making sense for us and for our customers and the first product that we talk about we always talk about the significant amount of NRE that they are paying out right now and the first revenue generated for silicon for the first ac project a semi-costal chip asic is going to be uh early next year so the in terms of the gross margin impact i think there's smoke we still believe that that overall if you average out the whole business in that first silicon that the gross margin is still within our long-term gross margin but i also believe that to exchange for more aggressive MIE, that business model might change for others in the future. So because it's really uncertain, I don't want to talk about it. We don't want to give you an indication just yet. I just want to tell you that it's a variety of possibility, and we are willing to talk with the customer that won't work with us. Obviously, at the end, that has to be beneficial for me, for Embraerla, as well as for our customers.
Got it. Thank you for that. And then just a housekeeping question. And did you give me a sense of, in the IoT business, how much of that was industrial and how much of it was consumer?
Maybe if we divide it, you know, by PAPX-driven businesses versus consumer-driven. Gus, this is Lewis speaking, by the way. It's roughly 50-50. It didn't change much from the prior couple of quarters. Got it. Think about if we break it down, if we break it down a little bit and, you know, IOT, you know, for the year was around 80 percent of revenue and security, which is mostly enterprise security for us. Obviously, that's enterprise CapEx. There's a little bit of home there. But then in portable video, things like wearables or enterprise video conferencing. And I think we had three announcements in that category this quarter. That's enterprise CapEx. But then you have 360-degree cameras, things like aerial drones, which did go to production for us in Q4. Those are all, you know, consumer, prosumer type related. So that's how you get to the roughly 50-50.
Operator
Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Dr. Fermi Wong for closing remarks.
Yeah, thank you for joining our call today, and I hope to see you at some of our numerous events this quarter. We'll talk to you next time.
Operator
This concludes today's conference call. Thank you for participating, and you may now just connect. Everyone have a great day.
