Ambarella Earnings: Chipmaker Delivers Another Strong Quarter

By Markets Fool.com

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Ambarella's A9 chip. Image source: Ambarella.com.

Imaging and video chipmaker Ambarella released its first-quarter results after Tuesday's market close. The company delivered non-GAAP diluted earnings per share of $0.71 on revenue of $71 million, with earnings that beat the average analyst estimate as surveyed by Thomson Reuters. The poll anticipated non-GAAP diluted earnings of $0.59 EPS on revenue of $67.36 million. By 11:45 a.m. Wednesday, shares were up roughly 5%.

The results
Revenue for the quarter ended April 30 came in a good bit ahead of the company's target, and net income was significantly better than anticipated. Ambarella's guidance for the quarter called for between $64 million and $68 million in revenue, and non-GAAP net income between $18 million and $20 million.

The quarter's sales of $71 million came in roughly 4.4% ahead of the top end of the company's target. Non-GAAP net income was $23.7 million, or about 18.5% better than the company's target. Non-GAAP margin for the quarter came in at 64.8%, while the the company had targeted margins between 62% and 64%. GAAP EPS was $0.56 on net income of $18.9 million

Looking at year-over-year performance, sales for the quarter were up 73.5%, GAAP net income grew roughly 257%, and GAAP EPS gained roughly 229%. Cash equivalents and marketable securities grew from $155.6 million at the end of the quarter in the last fiscal year to $235.2 million as of April 30. Cost of revenue grew to roughly $25.1 million from roughly $15.3 million in the year prior. Total operating expenses grew roughly 30% to $25.6 million, with research and development costs increasing from roughly 12.9 million to roughly 16.8 million and selling, general, and administrative spending increasing from roughly $6.8 million to just above $9 million.

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What's next for Ambarella

Ambarella's S2 Security IP systems on a chip. Image source: Ambarella.com.

Ambarella and its stock have been on an incredible run, with shares up roughly 84% year to date and more than 1,400% since its 2012 IPO, but the big gains provide good reason to survey the company's outlook. The explosive stock performance has pushed the forward P/E value for the approximately $2.9 billion market cap company to 55, a valuation that implies aggressive and sustained growth.

Yet Ambarella appears to be in solid position to deliver. Demand is booming for the company's imaging chips, with companies such as GoPro driving huge sales and unfolding promise in foreign markets, thereby presenting opportunities for big expansion. GoPro, which currently accounts for roughly a third of Ambarella's sales, will continue to be a key partner, and Ambarella's outlook has benefited from improved performance targets and product announcements. While GoPro remains important to Ambarella's business, the company is also widening its client base in the segment by getting its chips inside camera devices from the likes of Xiaomi and Garmin. Strong performance in China and South Korea has also help the company routinely beat expectations for quarterly results.

Both the action- and security-camera markets are booming, and Ambarella's low-power, high-performance chips put it in strong position to win supply contracts. The company also has a growth opportunity in automobile cameras and stated in its earnings press release that it anticipates that the quadcopter market is starting to take off. For upcoming quadcopters and action cameras, Ambarella will probably see see strong uptake for its high-end H1 SoC.

The chip, which was revealed at CES in January, is top-of-the-line relative to power consumption and offers 4K video footage at 60 frames per second. Along with many of its other chips, the company's A12W SoC for wearable security cameras seems poised for strong adoption, with an increasing number of police forces and private security teams adopting bodycams and Internet of Things applications starting to unfold.

So even with its stock price at all time highs, Ambarella may still have room to run.

The article Ambarella Earnings: Chipmaker Delivers Another Strong Quarter originally appeared on Fool.com.

Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Ambarella, Apple, and GoPro. The Motley Fool owns shares of Ambarella, Apple, and GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.