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What changed in AMBARELLA INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMBARELLA INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+445 added−442 removedSource: 10-K (2023-03-31) vs 10-K (2022-04-01)

Top changes in AMBARELLA INC's 2023 10-K

445 paragraphs added · 442 removed · 339 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

80 edited+8 added−8 removed97 unchanged
Biggest changeThe chart below describes our current product lines: Technology Our semiconductor processing solutions enable artificial intelligence and computer vision processing, HD, UHD and 8K UHD (up to 7680 x 4320p60) video and image processing, and video compression, sharing and display while offering exceptional power, size, and performance characteristics. 9 Key differentiators of our technology include: • flexible and scalable CVflow processors for deep learning, HD radar processing and other CV algorithms that cover a broad range of consumer, professional and automotive requirements from around one eTOP to 500 eTOPs with power and die size efficiency; • stereo/optical flow processing engines for robust CV processing with high performance and power efficiency; • scalable image processing and video compression engines that cover consumer, professional and automotive requirements from Full HD to 8K video performance levels as well as multiple image sensors simultaneously to support multiple viewpoints, including surround view and virtual reality applications; • algorithms for image processing including deep learning augmented processing for challenging low light and high dynamic range conditions for robust CV and human viewing with high power efficiency. • algorithms and software for scalable and robust HD radar processing using sparse antenna arrays using machine learning and adaptive transmit waveforms for lower cost and better power efficiency; • deep learning algorithms and software for multi class 2D/3D object detection and segmentation, including vehicles, pedestrians, cycles, road markings, traffic signs and traffic lights optimized for our CV2 and CV3 SoC families; • algorithms and software for stereo obstacle detection to provide robust safety in the event of obstacles that are not in the training data; • autonomous driving stack modules optimized for our CV3 SoC family, including fusion for multiple cameras and sensor modalities, mapping and localization algorithms and planning; • algorithms to compress video signals with high compression and power efficiency at multiple operating points; • software development kit comprised of application programming interfaces, or APIs, to facilitate integration into customers’ products; and tools for porting and optimizing customer deep neural networks, or DNNs, developed in industry standard training frameworks; • low-power architecture with minimal system memory footprint; and 10 • programmable architecture that balances flexibility, quality, power and die size with powerful CPUs and optimized hardware acceleration to support advanced processing functions.
Biggest changeKey differentiators of our technology include: • flexible and scalable CVflow processors for deep learning, HD radar processing and other CV algorithms that cover a broad range of consumer, professional and automotive requirements with power and die size efficiency; • stereo/optical flow processing engines for robust CV processing with high performance and power efficiency; • scalable image processing and video compression engines that cover consumer, professional and automotive requirements from Full HD to 8K video performance levels as well as multiple image sensors simultaneously to support multiple viewpoints, including surround view and virtual reality applications; • algorithms for image processing including deep learning augmented processing for challenging low light and high dynamic range conditions for robust CV and human viewing with high power efficiency. • algorithms and software for scalable and robust HD 4D radar processing using sparse antenna arrays using machine learning and adaptive transmit waveforms for lower cost and better power efficiency; • deep learning algorithms and software for multi class 2D/3D object detection and segmentation, including vehicles, pedestrians, cycles, road markings, traffic signs and traffic lights optimized for our CV2 and CV3 SoC families; • algorithms and software for stereo obstacle detection to provide robust safety in the event of obstacles that are not in the training data; • autonomous driving stack modules optimized for our CV3 SoC family, including fusion for multiple cameras and sensor modalities, mapping and localization algorithms and planning; • algorithms to compress video signals with high compression and power efficiency at multiple operating points; • software development kit comprised of application programming interfaces, or APIs, to facilitate integration into customers’ products; and tools for porting and optimizing customer deep neural networks, or DNNs, developed in industry standard training frameworks; • low-power architecture with minimal system memory footprint; and • programmable architecture that balances flexibility, quality, power and die size with powerful CPUs and optimized hardware acceleration to support advanced processing functions. 10 Our technology platform is based on a high-performance, low-power architecture supported by a high level of system integration.
As described below, Ambarella’s products are now used in a wide variety of human viewing and computer vision applications, including a variety of automotive camera systems, video security cameras, mobile and fixed robots and industrial applications, and consumer devices, such as action, drone and 360 ° cameras.
As described below, Ambarella’s products are now used in a wide variety of human viewing and computer vision applications, including a variety of automotive camera systems, video security cameras, mobile and fixed robots, industrial applications, and consumer devices, such as action, drone and 360° cameras.
In addition, we provide to our customers full-function software development kits with a suite of application programming interfaces or APIs, which allow customers to rapidly integrate our solution, adjust product specifications and provide additional functionality to their systems, thereby enabling them to differentiate their product offerings and reduce time to market.
In addition, we provide our customers full-function software development kits with a suite of application programming interfaces or APIs, which allow customers to rapidly integrate our solution, adjust product specifications and provide additional functionality to their systems, thereby enabling them to differentiate their product offerings and reduce time to market.
In the IoT market, our primary competitors include AMLogic Inc., Fuzhou Rockchip Electronics Co., Ltd., HiSilicon Technologies Co., Ltd., or HiSilicon, which is owned by Huawei Technologies Co., Ingenic Semiconductor Co., Ltd., Novatek Microelectronics Corp., or Novatek, NVIDIA Corporation, or NVIDIA, OmniVision Technologies, Inc., Qualcomm Incorporated, or Qualcomm, SigmaStar Technology Corp., and Socionext Inc.
In the IoT market, our primary competitors include AMLogic Inc., Fuzhou Rockchip Electronics Co., Ltd., HiSilicon Technologies Co., Ltd., or HiSilicon, which is owned by Huawei Technologies Co., Ingenic Semiconductor Co., Ltd., Novatek Microelectronics Corp., or Novatek, NVIDIA Corporation, or NVIDIA, OmniVision Technologies, Inc., Qualcomm Incorporated, or Qualcomm, Sigmastar Technology Ltd., and Socionext Inc.
Our ability to compete successfully in the rapidly evolving camera markets depends on several factors, including: • the design and manufacturing of new solutions, including software, that anticipate the video processing and integration needs of our customers’ next-generation products and applications; • performance of our computer vision solutions, as measured by convolutional neural network performance, video and still picture image quality, resolution and frame processing rates; • power consumption efficiency of our solutions; • the ease of implementation of our products by customers; • the strength of our customer relationships; • the selection of the foundry process technology and architecture tradeoffs to meet customers’ product requirements in a timely manner; • reputation and reliability; • customer support; and • the cost of the total solution.
Our ability to compete successfully in the rapidly evolving camera markets depends on several factors, including: • the design and manufacturing of new solutions, including software, that anticipate the video processing and integration needs of our customers’ next-generation products and applications; • performance of our computer vision solutions, as measured by convolutional neural network performance, video and still picture image quality, resolution and frame processing rates; • power consumption efficiency of our solutions; • the ease of implementation of our products by customers; • the strength of our customer relationships; • the selection of the foundry process technology and architecture tradeoffs to meet customers’ product requirements in a timely manner; 15 • reputation and reliability; • customer support; and • the cost of the total solution.
In addition, privacy and security can be enhanced, as critical personal information may not need to enter the network infrastructure. Our first CV SoC was introduced in 2018 and CV3 is our third generation computer vision SoC family. Our development efforts are now focused on SoCs that provide both human viewing and computer vision functionality.
In addition, privacy and security can be enhanced, as critical personal information may not need to enter the network infrastructure. Our first CV SoC was introduced in 2018 and CV3 is our third generation computer vision chip in our SoC family. Our development efforts are now focused on SoCs that provide both human viewing and computer vision functionality.
We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. 16 Despite our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our software, technology or other information that we regard as proprietary intellectual property.
We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. Despite our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our software, technology or other information that we regard as proprietary intellectual property.
We believe that our leadership is the result of our competitive strengths, including: • Proprietary Computer Vision Architecture. Our proprietary AI and computer vision processing architecture, known as CVflow, uses a flexible hardware engine programmed with a high level algorithm description to achieve increased performance while minimizing die size and power consumption.
We believe that our leadership is the result of our competitive strengths, including: • Proprietary AI, Radar and Computer Vision Architecture. Our proprietary AI and computer vision processing architecture, known as CVflow, uses a flexible hardware engine programmed with a high level algorithm description to achieve increased performance while minimizing die size and power consumption.
Successful implementation of these computationally intensive steps has helped us maximize compression efficiency. We support H.264 and H.265 video compression standard with our H.265 providing up to 2x better compression efficiency compared to our H.264 video compression technology. Design Methodology The success of our technology platform stems from our algorithm driven design methodology.
Successful implementation of these computationally intensive steps has helped us maximize compression efficiency. We support H.264 and H.265 video compression standard with our H.265 providing up to 2x better compression efficiency compared to our H.264 video compression technology. 12 Design Methodology The success of our technology platform stems from our algorithm driven design methodology.
We carefully qualify each of our suppliers and their subcontractors and processes in order to meet the extremely high-quality and reliability standards required of our solutions. 14 Wafer Fabrication We have a history of using several process nodes from 130 nm through 5 nm.
We carefully qualify each of our suppliers and their subcontractors and processes in order to meet the extremely high-quality and reliability standards required of our solutions. Wafer Fabrication We have a history of using several process nodes from 130 nm through 5 nm.
AmbaClear 12 Our proprietary image signal processing architecture, known as AmbaClear, incorporates advanced algorithms to convert raw sensor data to UHD video and/or still images.
AmbaClear Our proprietary image signal processing architecture, known as AmbaClear, incorporates advanced algorithms to convert raw sensor data to UHD video and/or still images.
In addition, this approach often requires personal information to be transmitted from the end-point device to the network infrastructure, potentially raising privacy and security concerns. 4 We believe the CV end-point market, sometimes referred to as the system’s edge, requires a fundamentally different SoC architecture versus the GPU, FPGA and CPU approach commonly utilized in the datacenter.
In addition, this approach often requires personal information to be transmitted from the end-point device to the network infrastructure, potentially raising privacy and security concerns. 4 We believe the CV end-point market, sometimes referred to as the system’s edge, requires a fundamentally different SoC architecture versus the GPU, FPGA and CPU approach commonly used in the datacenter.
Many of our issued patents and pending patent applications relate to image and video processing and HD video compression, AI processing, system level camera, and radar perception applications spanning multiple market segments . We may not receive competitive advantages from any rights granted under our patents, and our patent applications may not result in the issuance of any new patents.
Our issued patents and pending patent applications primarily relate to image and video processing and HD video compression, AI processing, system level camera, and radar perception applications spanning multiple market segments . We may not receive competitive advantages from any rights granted under our patents, and our patent applications may not result in the issuance of any new patents.
Our solutions enable the streaming of multiple video streams to enable remote monitoring at multiple locations. Embedded computer vision technology supports advanced analytics at the system’s edge, including people counting and tracking, facial recognition and retail behavior analysis. ▪ Home IP Security Cameras .
Our solutions enable the streaming of multiple video streams to enable remote monitoring at multiple locations. Embedded computer vision technology supports advanced analytics at the system’s edge, including people counting and tracking, facial recognition and retail behavior analysis. ▪ Home Security .
Smart electronic mirrors that incorporate our CV SoCs may also help with detecting objects in blind spots, overtaking vehicles and vulnerable road users, such as pedestrians and bicycles. ▪ Front Advanced Driver Assistance System (ADAS) Cameras.
Smart electronic mirrors that incorporate our CV SoCs may also help with detecting objects in blind spots, overtaking vehicles and alerting for vulnerable road users, such as pedestrians and bicycles. ▪ Front Advanced Driver Assistance System (ADAS) Cameras.
We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us remain competitive.
We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and efficiency. We believe this strategy will help us remain competitive.
With the acquisition of Oculii, we also now complement our advanced camera perception capabilities with advanced radar perception to enable higher levels of autonomy. We are focusing on the automotive and Internet-of-Things (IoT) end markets: • Automotive Cameras .
With the acquisition of Oculii, we also now complement our advanced camera perception capabilities with advanced radar perception to enable higher levels of autonomy. We are focusing on the automotive and Internet-of-Things (IoT) end markets: • Automotive Applications .
Consequently, we believe we are well positioned to not only be designed into our customers’ current products, but also to continually develop next-generation HD video and image processing solutions for their future products. 13 The product life cycles in many of our target markets typically range from twelve to 24 months.
Consequently, we believe we are well positioned to not only be designed into our customers’ current products, but also to continue to develop next-generation HD video and image processing solutions for their future products. The product life cycles in many of our target markets typically range from twelve to 24 months.
Our CV products enable higher levels of automation than our vision processors through advanced algorithms, such as object detection, classification and tracking, license plate recognition and facial recognition. We address the following security camera applications: ▪ Professional IP Security Cameras . These cameras are used for video monitoring and security surveillance in enterprise and public infrastructure applications.
Our CV products enable higher levels of automation than our vision processors through advanced algorithms, such as object detection, classification and tracking, license plate recognition and facial recognition. We address the following security camera applications: ▪ Enterprise and Public Class Security . These cameras are used for video monitoring and security surveillance in enterprise and public infrastructure applications.
Our unique architecture and advanced process node technology lowers power consumption while maintaining high performance for security camera and consumer applications such as connected drones, sports cameras, and 360º (VR) cameras. High Definition Radar .
Our unique architecture and advanced process node technology lower power consumption while maintaining high performance for security camera and consumer applications such as connected drones, sports cameras, and 360º (VR) cameras. High Definition Radar .
Currently, the substantial majority of our SoCs are supplied by Samsung in facilities located in Austin, Texas and South Korea, from whom we have the option to purchase both fully-assembled and tested products as well as tested die in wafer form for assembly. We also have products supplied by GlobalFoundries Inc.
Currently, the substantial majority of our SoCs are supplied by Samsung in facilities located in Austin, Texas and South Korea, from whom we have the option to purchase both fully-assembled and tested products as well as tested die in wafer form for assembly. We also have small volumes of some products supplied by GlobalFoundries Inc.
The CVflow architecture supports a variety of AI and computer vision algorithms, including object detection, classification and tracking, semantic and instance segmentation, image processing, and stereo object detection, and allows customers to differentiate their products by porting their own algorithms and neural networks to our CVflow-based SoCs. • Deep Sensor Fusion .
The CVflow architecture supports a variety of AI, radar and computer vision algorithms, including object detection, classification and tracking, semantic and instance segmentation, image processing, and stereo object detection. CVflow also allows customers to differentiate their products by porting their own algorithms and neural networks to our SoCs. • Deep Sensor Fusion .
We are a leader in professional and home IP security camera markets, with solutions that deliver exceptional computer vision performance, industry-leading compression efficiency, low power consumption, and outstanding image quality, including high dynamic range (HDR), low-light processing and fisheye lens dewarping.
We are a leader in enterprise and home security camera markets, with solutions that deliver exceptional computer vision performance, industry-leading compression efficiency, low power consumption, and outstanding image quality, including high dynamic range (HDR), low-light processing and fisheye lens dewarping.
Our platform allows customers to differentiate their products by porting and optimizing their own algorithms and neural networks to our CVflow-based chips from industry-standard training tools and APIs. Computer Vision and Radar Technology 11 Computer vision is a core technology that complements our proprietary image processing and video compression technology.
Our platform allows customers to differentiate their products by porting and optimizing their own algorithms and neural networks to our CVflow-based chips using industry-standard training tools and APIs. Computer Vision and Radar Technology Computer vision is a core technology that complements our proprietary image processing and video compression technology.
Oculii’s software can be deployed on Ambarella’s existing CVflow SoCs, operating in conjunction with leading radar RF solutions to increase safety and reliability. Serializer/Deserializers .
Oculii’s software can be deployed on Ambarella’s existing CVflow SoCs, operating in conjunction with leading radar RF solutions to increase safety and reliability.
We have developed efficient deep learning algorithms for object detection and segmentation leveraging our deep understanding of the CVflow processor. A significant feature of our CV SoCs is support for HD stereo and HD radar based depth sensing. We believe HD stereo and HD radar are complementary sensor modalities that provide robust depth information after fusion.
We have developed efficient deep learning algorithms for object detection and segmentation leveraging our deep understanding of the CVflow processor. A significant feature of our third generation CVflow SoCs is support for HD stereo and HD radar based depth and velocity sensing. We believe HD stereo and HD radar are complementary sensor modalities that provide robust depth information after fusion.
We refer to ODMs and Tier-1 suppliers as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires. Sales to customers in Asia accounted for approximately 88%, 88%, and 90% of our total revenue in the fiscal years ended January 31, 2022, 2021, and 2020, respectively.
We refer to ODMs and Tier-1 suppliers as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires. Sales to customers in Asia accounted for approximately 82%, 88%, and 88% of our total revenue in the fiscal years ended January 31, 2023, 2022, and 2021, respectively.
These purchase orders may be cancelled without charge upon notification within an agreed period of time in advance of the delivery date, which may be as short as 30 days. Our standard warranty provides that our SoCs containing defects in materials, workmanship or performance may be returned for a refund of the purchase price or for replacement, at our discretion.
These purchase orders may be cancelled without charge upon notification within an agreed period of time in advance of the delivery date. Our standard warranty provides that our SoCs containing defects in materials, workmanship or performance may be returned for a refund of the purchase price or for replacement, at our discretion.
Our multi-core DSP architecture is highly scalable and balances software programmability with hardware-accelerated performance to achieve extremely low power consumption and maximized camera battery life. We have used this scalability to develop an extensive family of software compatible SoCs with a wide range of performance and price points (CV28, CV25, CV22, CV2, CV2FS, and CV5).
Our multi-core DSP architecture is highly scalable and balances software programmability with hardware-accelerated performance to achieve extremely low power consumption and maximized camera battery life. We have used this scalability to develop an extensive family of software compatible SoCs with a wide range of performance and price points (CV28, CV25, CV22, CV2, CV2FS, CV5, CV3 AD685, and CV-3 High Dev).
We believe that our continued success depends on our ability to both introduce improved versions of our existing solutions and to develop new solutions for the markets that we serve. As of January 31, 2022, 75% of our employees are engaged in research and development. Our research and development team is comprised of both semiconductor and software designers.
We believe that our continued success depends on our ability to both introduce improved versions of our existing solutions and to develop new solutions for the markets that we serve. As of January 31, 2023, approximately 74% of our employees are engaged in research and development. Our research and development team is comprised of both semiconductor and software designers.
Our solutions achieve high storage and transmission efficiencies through innovative and complex video and image compression algorithms that significantly reduce the output bitrate. This smaller storage footprint directly benefits the performance of our solutions in several ways, including lower memory storage requirements and reduced bandwidth needs for transmission, which is more conducive to sharing content between devices.
Our solutions achieve high storage and transmission efficiencies through innovative and complex video and image compression algorithms that significantly reduce the output bitrate. This smaller storage footprint directly benefits the performance of our solutions in several ways, including lower memory storage requirements and reduced bandwidth needs for transmission, which both facilitate sharing content between devices.
Our SerDes chips are also used in security applications, for example, ATMs may use a single B6 chip for connecting multiple remote cameras to a single video processor SoC. 8 Software Modules . In the future, we may separately license proprietary software modules that can be used in conjunction with a customer’s internally developed software and/or with third-party software.
Our SerDes chips are also used in security applications such as ATMs that can use a single B8 chip for connecting multiple remote cameras to a single video processor SoC. Software Modules . In the future, we may separately license proprietary software modules that can be used in conjunction with a customer’s internally developed software and/or with third-party software.
These laboratories may maintain small quantities of hazardous materials. While we believe we are in material compliance with applicable law concerning the safeguarding of these materials and with respect to other matters relating to health, safety and the environment, the risk of liability relating to hazardous conditions or materials cannot be eliminated completely.
While we believe we are in material compliance with applicable law concerning the safeguarding of these materials and with respect to other matters relating to health, safety and the environment, the risk of liability relating to hazardous conditions or materials cannot be eliminated completely.
The SerDes chips are used to add additional camera(s) to an automotive application, as well as used as a bridge chip for other automotive applications, such as MIPI combiner, splitter and display drivers.
The SerDes chips are used to add additional camera(s) to an automotive application, as well as used as a bridge chip for other automotive applications, such as a MIPI combiner, splitter or display driver.
Our next generation CV3 family extends our CVflow architecture to cover L2+/L3/L4 autonomous driving and other high performance safety critical applications. The CV3 family will cover multiple performance and price points as we have done with the CV2 family with a software compatible SDK.
Our next generation CV3 family extends our CVflow architecture to cover L2+/L3/L4 autonomous driving and other high performance safety critical applications. The CV3 family will cover multiple performance and price points with a software compatible SDK.
Due to the scheduling requirements of our foundry, assembly and test contractors, we generally provide our contractors with our production forecasts and place firm orders for products with our suppliers up to 36 weeks prior to the anticipated delivery date, or potentially longer during times of acute capacity shortages, usually without a purchase order from our own customers.
Our assembly and testing vendors are also ISO 9001 certified. 14 Due to the scheduling requirements of our foundry, assembly and test contractors, we generally provide our contractors with our production forecasts and place firm orders for products with our suppliers up to 36 weeks prior to the anticipated delivery date, or potentially longer during times of acute capacity shortages, usually without a purchase order from our own customers.
In fiscal year 2022, the customers representing 10% or more of revenue were Wintech Microelectronics Co., Ltd., or Wintech, our Asia-based distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer that manufactures products for multiple end-customers, which accounted for approximately 62% and 13% of total revenue, respectively.
In fiscal year 2023, the customers representing 10% or more of revenue were Wintech Microelectronics Co., Ltd., or WT, our Asia-based distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer that manufactures products for multiple end-customers, which accounted for approximately 57% and 12% of total revenue, respectively.
Our recent development efforts have focused on creating advanced AI technology that enables edge devices to visually perceive the environment and make decisions based on the data collected from cameras and, most recently, other types of sensors.
Our recent development efforts have focused on creating advanced AI technology that enables edge devices to visually perceive the environment and make decisions based on the data collected from cameras and other types of sensors, such as 4D radar.
We utilize multiple online search tools, specialized recruiting firms, employee referral programs and university hires to ensure a varied outreach approach for candidates. We are committed to ensuring the human rights of our worldwide workforce and treating all employees with dignity and respect.
Our human capital resources objectives include attracting and retaining talented and experienced employees. We utilize multiple online search tools, specialized recruiting firms, employee referral programs and university hires to ensure a varied outreach approach for candidates. We are committed to ensuring the human rights of our worldwide workforce and treating all employees with dignity and respect.
Cameras are utilized for a variety of applications in the automotive market and our products are designed into both original equipment manufacturer (OEM) and aftermarket applications. We address the following automotive market applications: ▪ Automotive Video Recorders (also known as data loggers).
Cameras and other sensors, as well as high performance computing processors, are utilized for a variety of applications in the automotive market and our products are designed into both original equipment manufacturer (OEM) and aftermarket applications. We address the following automotive market applications: ▪ Automotive Video Recorders (also known as data loggers).
Our CV3 SoC integrates camera and radar perception processing on the same SoC, allowing data from both camera and radar sensors to be fused at a deeper data level, which we believe will facilitate improved levels of perception accuracy. • High-Performance, Low Power, AI, Video and Image Algorithm Expertise .
Our CV3 SoC family implements centralized camera and radar perception processing on the same SoC, allowing data from all camera and radar sensors in the sensor suite to be fused at a deeper data level, which we believe will facilitate improved levels of perception accuracy. • High-Performance, Low Power, AI, Video and Image Algorithm Expertise .
Our product families leverage our core high-performance AI and video processing architecture combined with an extensive set of integrated peripherals, which enables our platform to address the requirements of a variety of applications and end markets. Our flexible and highly-scalable platform enables us to address multiple markets with reduced design cycles and costs.
Our product families leverage a flexible and highly-scalable platform including our core high-performance AI and video processing architecture combined with an extensive set of integrated peripherals. Our flexible and highly-scalable platform enables our customers to address multiple applications and markets with reduced design cycles and costs.
Human Capital Resources Innovation has been the lifeblood of our company since our founding in 2004. We have continually strived to develop leading-edge image and video, and now AI, processors using the most advanced semiconductor processes available. We depend on our people to sustain our competitive advantages.
Human Capital Resources Innovation has been the lifeblood of our company since our founding in 2004. We continually strive to develop leading-edge image and video, and now AI, processors using the most advanced semiconductor processes available to create high performance, power efficient SoCs. We depend on our people to sustain our competitive advantages.
For our fiscal years ended January 31, 2022, 2021and 2020, we recorded revenue of $331.9 million, $223.0 million and $228.7 million, respectively. For the fiscal years ended January 31, 2022, 2021 and 2020, we incurred net losses of $26.4 million, $59.8 million and $44.8 million, respectively. We have generated cash from operations in each fiscal year starting from 2009.
For our fiscal years ended January 31, 2023, 2022 and 2021, we recorded revenue of $337.6 million, $331.9 million and $223.0 million, respectively. For the fiscal years ended January 31, 2023, 2022 and 2021, we incurred net losses of $65.4 million, $26.4 million and $59.8 million, respectively. We have generated cash from operations in each fiscal year starting from 2009.
These SoCs combine advanced image processing, high-resolution video encoding and CVflow AI processing in a single, low-power design to enable a new class of smart edge devices for applications including smart home security, retail monitoring, consumer robotics, and occupancy monitoring. Vision Processor SoCs.
These SoCs combine advanced image processing, high-resolution video encoding and CVflow AI processing in a single, low-power design to enable a new class of smart edge devices for applications including smart home security, retail monitoring, consumer robotics, and occupancy monitoring. Some of our CVflow SoCs are manufactured to satisfy the functional safety requirements of the automotive market. Vision Processor SoCs.
Governmental Regulation Our business and operations around the world are subject to government regulation at the national, state or local level addressing, among other matters, applicable environmental laws, health and safety laws and regulations, laws relating to export controls and economic sanctions, and the rules of industrial standards bodies such as the International Standards Organization and governmental agencies such as the Federal Trade Commission.
Governmental Regulation Our business and operations around the world are subject to government regulation at the national, state or local level addressing, among other matters, applicable environmental laws, health and safety laws and regulations, laws relating to export controls and economic sanctions, and the rules of industrial standards bodies such as the International Standards Organization and governmental agencies such as the Federal Trade Commission. 16 We believe that our properties and operations comply in all material respects with applicable laws protecting the environment and worker health and safety.
Ambarella provides the AI perception processing for cameras, and with the acquisition of Oculii we provide software that enables HD radar perception on 3 rd party radar processors.
Ambarella provides AI perception processing for cameras, and with the acquisition of Oculii we provide software that enables efficient HD 4D radar perception.
Features that may be licensed include functionality for a variety of automotive applications, including dataloggers, front-facing ADAS systems, eMirror s and in-cabin applications.
Features that may be licensed include functionality for a variety of automotive applications, including dataloggers, ADAS and autonomous driving systems, eMirrors and in-cabin applications.
In the automotive camera market, we compete against Allwinner Technology Co., Ltd., Horizon Robotics Inc., iCatch Technology, Inc., Mobileye, a subsidiary of Intel Corporation, Novatek, NVIDIA, NXP Semiconductors N.V., Qualcomm, Renesas Electronics Corporation, and Texas Instruments.
In the automotive camera market, we compete against Allwinner Technology Co., Ltd., Horizon Robotics Inc., iCatch Technology, Inc., Mobileye, a subsidiary of Intel Corporation, Novatek, NVIDIA, NXP Semiconductors N.V., Qualcomm, Renesas Electronics Corporation, and Texas Instruments. Certain of our customers and suppliers also have divisions that produce products that compete with ours.
Assembly and Testing Samsung subcontracts the assembly and initial testing of the assembled chips it supplies to us to Signetics Corporation and STATS ChipPAC Ltd. In the case of purchases of tested die from Samsung, we contract the assembly to Advanced Semiconductor Engineering, Inc., or ASE. We contract the assembly of products supplied by Global Foundries Inc. to ASE.
Our foundry vendors are ISO 9001 certified. Assembly and Testing Samsung subcontracts the assembly and initial testing of the assembled chips it supplies to us to Signetics Corporation and STATS ChipPAC Ltd. In the case of purchases of tested die from Samsung, we contract the assembly to Advanced Semiconductor Engineering, Inc., or ASE.
As of January 31, 2022, we had 266 issued patents in the United States, 99 of which were continuation or divisional patents, 10 issued patents in Europe, 7 issued patents in China, 6 issued patents in Japan and 80 pending patent applications in the United States. The issued patents in the United States expire beginning in 2024 through 2040.
As of January 31, 2023, we had 300 issued patents in the United States, 109 of which were continuation or divisional patents, 10 issued patents in Europe, 7 issued patents in China, 7 issued patents in Japan and 86 pending patent applications in the United States. The issued patents in the United States expire beginning in 2024 through 2042.
Compatible Family of SoC Solutions Our current SoC designs integrate our fully-programmable and highly-efficient CVflow architecture, UHD image processing and video compression, applications processing and system functions onto a single chip, delivering exceptional performance, quality and power efficiency with differentiated features.
This allows more robust decisions to be made in applications such as autonomous driving. 11 Compatible Family of SoC Solutions Our current SoC designs integrate our fully-programmable and highly-efficient CVflow architecture, UHD image processing and video compression, applications processing and system functions onto a single chip, delivering exceptional performance, quality and power efficiency with differentiated features.
Our technology platform is based on a high-performance, low-power architecture supported by a high level of system integration. The building blocks of our platform are illustrated below: Our technology platform enables the capture of high-resolution still images and UHD video while simultaneously performing CV processing and encoding for high-quality storage and lower resolution real time streaming.
The building blocks of our platform are illustrated below: Our technology platform enables the capture of high-resolution still images and UHD video while simultaneously performing CV processing and encoding for high-quality storage and lower resolution real time streaming.
Stereo cameras and radar detect obstacles without relying on training for specific obstacle categories because the depth information is used to directly construct a three-dimensional model of the camera’s surroundings, including any obstacles. This allows more robust decisions to be made in applications such as autonomous driving.
Stereo cameras and radar detect obstacles without relying on training for specific obstacle categories because the depth information is used to directly construct a three-dimensional model of the camera’s surroundings, including any obstacles.
As of January 31, 2022, we employed a total of 899 people, including 245 in the United States, 583 in Asia, primarily in China and Taiwan, and 71 in Europe. Approximately 75% of our employees are engaged in research and development, 2% in operations, and 23% in sales, marketing, and administration.
As of January 31, 2023, we employed a total of 937 people, including 260 in the United States, 595 in Asia, primarily 355 in Taiwan and 223 in China, and 82 in Europe. Approximately 74% of our employees are engaged in research and development, 2% in operations, and 24% in sales, marketing and administration.
As of January 31, 2022, females represented 30% of our outside directors, 22% of senior management, 17% of our technical roles, and 21% of our total workforce. Of our total employee workforce, 39% is represented by a work council in Taiwan.
As of January 31, 2023, females represented 29% of our independent directors, 21% of senior management, 16% of our technical roles, and 20% of our total workforce. Of our total employee workforce, 38% is represented by a work council in Taiwan.
Our advanced de-warping capability enables cameras to use wide angle lenses to capture images from a wide area, making it ideal for a variety of IP security camera applications, as well as 3D electronic image stabilization and surround view for automotive applications. • Proprietary Video Processing Architecture .
Our advanced de-warping capability enables cameras to use wide angle lenses, making it ideal for a variety of security camera applications, as well as 3D electronic image stabilization and surround view for automotive applications. • Highly Integrated SoC Solutions Based on a Scalable Platform .
Our technologies make cameras smarter, enabling features such as person detection, object classification, and analytics, in addition to performing complex data analysis in real time, delivering high quality imagery, and preserving vital system resources such as power and network bandwidth. We specialize in the development of deployable, scalable designs for intelligent cameras, offering a proven path to mass production.
Our technologies make electronic systems smarter, enabling features such as person detection, object classification, and analytics, in addition to performing complex data analysis in real time, delivering high quality imagery, and preserving vital system resources such as power and network bandwidth.
Final testing of all of our products is handled by King Yuan Electronics Co., Ltd. or Sigurd Corporation under the supervision of our engineers. All test software and related processes for our products are developed by our engineers. We continually monitor the results of testing at all of our test contractors to ensure that our testing procedures are properly implemented.
We contract the assembly of products supplied by Global Foundries Inc. to ASE. Final testing of our products is handled primarily by Sigurd Corporation or King Yuan Electronics Co., Ltd. under the supervision of our engineers. All test software and related processes for our products are developed by our engineers.
Products We have a wide range of products in our portfolio, including products that have commercially shipped, products for which we have shipped engineering samples and products that are under development.
Our software development kits (SDKs) contain reference code for specific features that customers can quickly deploy. 7 Products We have a wide range of products in our portfolio, including products that have commercially shipped, products for which we have shipped engineering samples and products that are under development.
We have direct sales personnel covering the United States, Asia and Europe, and we operate sales offices in Santa Clara, California and Hong Kong, and business development offices in China, Germany, Japan, South Korea, and Taiwan. In addition, in each of these locations we employ a staff of field applications engineers to provide direct engineering support locally to our customers.
We have direct sales personnel covering the United States, Asia and Europe, and we operate sales offices in Santa Clara, California and Hong Kong, and business development offices in China, Germany, Japan, South Korea, and Taiwan.
Our DMS solutions can be integrated with supplementary camera applications, including electronic mirror, front ADAS, and high-resolution driver recording. ▪ Central domain controllers for L2+ to L4 Autonomous Vehicles.
Our solutions process our customers’ interior-sensing algorithms at high speeds and with low power consumption, and are effective even at night via onboard RGB-infrared processing. Our DMS solutions can be integrated with supplementary camera applications, including electronic mirror, front ADAS, and high-resolution driver recording. ▪ Central domain controllers for L2+ to L4 Autonomous Vehicles.
Our Chief Executive Officer holds quarterly town hall style meetings with employees of all of our offices to keep employees apprised of company activities and objectives and to provide an opportunity for all employees to meet and ask questions. 17 Our human capital resources objectives include attracting and retaining talented and experienced employees.
Our Chief Executive Officer holds quarterly town hall style meetings with employees of all of our offices to keep employees apprised of company activities and objectives and to provide an opportunity for all employees to meet and ask questions. All employees receive training in the prevention of sexual harassment and abusive conduct in the workplace.
The average tenure of our employees is approximately 6.8 years and approximately 27% of our employees have been employed by us for more than 10 years. We believe our compensation and benefits packages, combined with our culture that promotes teamwork, innovation and hands-on experience from the first day of employment, contribute to low employee turnover and an above-average tenure.
We believe our compensation and benefits packages, combined with our culture that promotes teamwork, innovation and hands-on experience from the first day of employment, contribute to low employee turnover and an above-average tenure. We monitor employee turnover rates by region and our company as a whole.
The address of our U.S. operating subsidiary is Ambarella Corporation, 3101 Jay Street, Santa Clara, California. The Securities and Exchange Commission, or SEC, maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding registrants that file electronically.
The Securities and Exchange Commission, or SEC, maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding registrants that file electronically.
Our software compatible portfolio of products with a broad range of performance and price points allows our customers to develop a range of end products from a common software base.
Our software compatible portfolio of products, with a broad range of performance and price points, allows our customers to develop a range of end products from a common software base. • Comprehensive and Flexible Software . Our years of investment in developing and optimizing our comprehensive and flexible software serve as the foundation of our high-performance video application solutions.
Certain of our customers and suppliers also have divisions that produce products competitive with ours. 15 Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends.
Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends.
The central domain controller in autonomous vehicles is connected to the camera, radar and other sensor suites. Using neural network and traditional computer vision processing, the domain controller fuses the sensor data and perceives the vehicle’s surroundings. Based on this multi-sensor surround perception, the domain controller estimates a safe driving path for the vehicle.
Using neural network and traditional computer vision processing, the domain controller fuses the sensor data and perceives the vehicle’s surroundings. Based on this multi-sensor surround perception, the domain controller estimates a safe driving path for the vehicle. In addition, the domain controller can simultaneously process in-cabin sensing applications, including driver and occupant monitoring. • Security Cameras .
If successful, this process culminates in a customer’s decision to use our solutions in its system, which we refer to as a design win.
Our typical sales cycle consists of a multi-month sales and development process involving our customers’ system designers and management and our sales personnel and software engineers. If successful, this process culminates in a customer’s decision to use our solutions in its system, which we refer to as a design win.
ITEM 1. BUSINESS Overview Ambarella is a leading developer of low-power system-on-a-chip, or SoC, semiconductors providing powerful artificial intelligence, or AI, processing, advanced image signal processing and high-resolution video compression.
ITEM 1. B USINESS Overview Ambarella is a leading developer of low-power system-on-a-chip, or SoC, semiconductors and software for edge artificial intelligence, or AI, applications.
We also provide extensive software tools to map algorithms from commonl y-used AI frameworks such as PyTorch or TensorF low into our proprietary CVflow architecture. Our SDKs contain reference code for specific features that customers can quickly deploy.
We also provide extensive software tools to map algorithms from commonly-used AI frameworks such as PyTorch or TensorFlow into our proprietary CVflow architecture.
These interior mounted cameras track drivers and passengers to help prevent accidents by alerting a drowsy or distracted driver and assist ing with the deployment of safety features, such as airbags.
These interior mounted cameras track drivers and passengers to help prevent accidents by alerting a drowsy or distracted driver and assisting with the deployment of safety features, such as airbags. These interior cameras may also be utilized by service providers, in particular with autonomous vehicles, to create new business opportunities in which in-cabin information, collected through cameras, may be monetized.
We monitor employee turnover rates by region and our company as a whole. Our worldwide voluntary employee turnover rate in fiscal year 2022 was approximately 6.3%. Our primary focus during the COVID-19 pandemic has been protecting the health and safety of our employees and the communities in which we operate.
Our worldwide voluntary employee turnover rate in fiscal year 2023 was approximately 7.4%. 17 Our primary focus during the COVID-19 pandemic has been protecting the health and safety of our employees and the communities in which we operate. In our locations that have experienced high rates of infection, employees have worked remotely to reduce spread of the virus.
We believe that our properties and operations comply in all material respects with applicable laws protecting the environment and worker health and safety. As a fabless semiconductor company, we do not manufacture our own products but do maintain laboratory space at certain of our facilities to facilitate the development, evaluation and testing of our SoC products.
As a fabless semiconductor company, we do not manufacture our own products but do maintain laboratory space at certain of our facilities to facilitate the development, evaluation and testing of our SoC products. These laboratories may maintain small quantities of hazardous materials.
Featuring up to 16 Arm® CPU cores, the CV3 provides up to a 30x boost in CPU performance over our prior generations in support of autonomous vehicle software applications. The CV3 family enables centralized, single-chip processing for multi-sensor perception, including high-resolution vision, radar, ultrasonic and lidar, as well as deep fusion for multiple sensor modalities and AV path planning.
The CV3 family enables centralized, single-chip processing for multi-sensor perception, including high-resolution vision, radar, ultrasonic and lidar, as well as deep fusion for multiple sensor modalities and autonomous vehicle path planning. The central domain controller in autonomous vehicles is connected to the camera, radar and other sensor suites.
Our CV technology is creating opportunities for us to address a broader range of markets and applications while also allowing us to capture more content per electronic system. In November 2021, we completed our acquisition of Oculii Corp., a developer of high definition radar technology.
Our CV technology is creating opportunities for us to address a broader range of markets and applications while also allowing us to capture more content per electronic system. Our new CV3 AI central domain controller family of SoCs is specifically architected for automated driving applications.
In other locations, employees have worked from home during certain periods of the pandemic as recommended by local health officials. Corporate Information Ambarella was founded and incorporated in the Cayman Islands in January 2004. Our registered address is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.
Corporate Information Ambarella was founded and incorporated in the Cayman Islands in January 2004. Our registered address is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The address of our U.S. operating subsidiary is Ambarella Corporation, 3101 Jay Street, Santa Clara, California.
As part of our total quality assurance program, our quality management system has been certified to ISO 9001:2015 standards. Our foundry vendors are also ISO 9001 certified.
We continually monitor the results of testing at all of our test contractors to ensure that our testing procedures are properly implemented. As part of our total quality assurance program, our quality management system has been certified to ISO 9001:2015 standards.
In January 2022, we introduced our new CV3 AI central domain controller family of SoCs. CV3 is specifically architected for automated driving applications. In addition to offering our existing advanced camera perception processing, CV3 adds sensor fusion and planning layers that enable a broader set of fully automated devices.
In addition to offering our existing advanced camera perception processing, CV3 adds sensor fusion and planning layers that enable a broader set of fully-automated devices. In November 2021, we acquired Oculii Corp., a developer of high definition radar technology.
Our sales cycles typically require a significant investment of time and a substantial expenditure of resources before we can realize revenue from the sale of our solutions, if any. Our typical sales cycle consists of a multi-month sales and development process involving our customers’ system designers and management and our sales personnel and software engineers.
In addition, in each of these locations we employ a staff of field applications engineers to provide direct engineering support locally to our customers. 13 Our sales cycles typically require a significant investment of time and a substantial expenditure of resources before we can realize revenue from the sale of our solutions, if any.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, but are not limited to, the following: • The COVID-19 pandemic could adversely affect our business in a material way, including closure of our offices or the facilities of our suppliers or customers. • Shortages in, or increased costs of, wafers and materials could increase the manufacturing times for our products and adversely impact our ability to meet customer demand, reduce our gross margins and lead to reduced revenues. 18 • We outsource our wafer fabrication, assembly and testing operations to third parties, and if these parties fail to produce and deliver our products according to requested demands in specification, quantity, cost and time, our reputation, customer relationships and operating results could suffer. • We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions. • Camera manufacturers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay orders for our solutions by our customers. • If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer. • If we fail to develop and introduce new or enhanced solutions that meet market requirements on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. • If we fail to penetrate new markets, including the automotive OEM ADAS market, our revenue and financial condition could be harmed. • Our target markets may not grow or develop as we currently expect and are subject to market risks, any of which could harm our business, revenue and operating results. • Our ability to sell our products to certain China customers has been restricted.
Biggest changeThese risks include, but are not limited to, the following: • Risks related to the global semiconductor supply shortage, high inflation and weak economic conditions could adversely affect our business, financial condition, and results of operations. • If we fail to penetrate new markets, including the automotive original equipment manufacturer, or OEM, advanced driver assistance systems (ADAS) market, our revenue and financial condition could be harmed. • If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer. • If we fail to develop and introduce new or enhanced solutions that meet market requirements on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. • Shortages in, or increased costs of, wafers and materials could adversely impact our gross margins and lead to reduced revenues. • Our primary inventory warehouse is located in Hong Kong and may be affected by political, social and economic conditions in Hong Kong. • Our target markets may not grow or develop as we currently expect and are subject to market risks, any of which could harm our business, revenue and operating results. • The COVID-19 pandemic has adversely affected our business and could materially and adversely affect our business in the future. • Our customers may cancel their orders, change production quantities or delay production.
If we fail to accurately forecast demand for our solutions, revenue shortfalls and/or excess, obsolete or insufficient inventory could result. • We depend on a limited number of customers and end customers for a significant portion of our revenue.
If we fail to accurately forecast demand for our solutions, revenue shortfalls or excess, obsolete or insufficient inventory could result. • We depend on a limited number of customers and end customers for a significant portion of our revenue.
We believe that our future revenue growth, if any, will significantly depend on our ability to expand within the Intelligence of Things (IoT) camera markets with our new artificial intelligence, or AI, computer vision SoC solutions, and the OEM automotive, robotics and industrial markets.
We believe that our future revenue growth, if any, will significantly depend on our ability to expand within the Intelligence of Things, or IoT, camera markets with our new artificial intelligence, or AI, computer vision SoC solutions, and the OEM automotive, robotics and industrial markets.
Our ability to compete will depend on a number of factors, including: • our ability to anticipate market and technology trends and successfully develop solutions that meet market needs; • our success in identifying and penetrating new markets, applications and customers; • our ability to understand the price points and performance metrics of competing products in the marketplace; • our solutions’ performance and cost-effectiveness relative to that of competing products; • our ability to gain access to leading design tools and product specifications at the same time as our competitors; • our ability to develop and maintain relationships with key OEMs and ODMs; • our products’ effective implementation of video processing or radar standards; • our ability to protect our intellectual property; • our ability to expand international operations in a timely and cost-efficient manner; • our ability to deliver products in volume on a timely basis at competitive prices; • our ability to support our customers’ incorporation of our solutions into their products; and • our ability to recruit design and application engineers with expertise in computer vision, video and image processing technologies and sales and marketing personnel.
Our ability to compete will depend on a number of factors, including: • our ability to anticipate market and technology trends and successfully develop solutions that meet market needs; • our ability to understand the price points and performance metrics of competing products in the marketplace; • our solutions’ performance and cost-effectiveness relative to that of competing products; • our success in identifying and penetrating new markets, applications and customers; • our ability to gain access to leading design tools and product specifications at the same time as our competitors; • our ability to develop and maintain relationships with key OEMs and ODMs; • our products’ effective implementation of video processing or radar standards; • our ability to protect our intellectual property; • our ability to expand international operations in a timely and cost-efficient manner; • our ability to deliver products in volume on a timely basis at competitive prices; • our ability to support our customers’ incorporation of our solutions into their products; and • our ability to recruit design and application engineers with expertise in computer vision, video and image processing technologies and sales and marketing personnel.
Final testing of all of our products is handled by King Yuan Electronics Co., Ltd. or Sigurd Corporation under the supervision of our engineers. We depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost and manufacturing quality.
Final testing of all of our products is handled by Sigurd Corporation or King Yuan Electronics Co., Ltd. under the supervision of our engineers. We depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost and manufacturing quality.
Factors that may affect our operating results include: • fluctuations in demand, sales cycles, product mix, and prices for our products; • the forecasting, scheduling, rescheduling or cancellation of orders by our customers; • shifts in consumer or manufacturer preferences and any resultant change in demand for our customers’ products; • changes in the competitive dynamics of our markets, including new entrants or pricing pressures; • delays in our customers’ ability to manufacture and ship products that incorporate our solutions caused by internal and external factors beyond our control; • our ability to successfully define, design and release new solutions in a timely manner that meet our customers’ needs; • timely availability of adequate manufacturing capacity from our manufacturing subcontractors; • changes in manufacturing costs, including wafer, test and assembly costs, mask costs, manufacturing yields and product quality and reliability; • the timing of product announcements by our competitors or by us; • incurrence of research and development and related new products expenditures; • write-downs of inventory for excess quantities and technological obsolescence; • impairment of investment or other asset values; 31 • future accounting pronouncements and changes in accounting policies; • volatility in our share price, which may lead to higher stock-based compensation expense; • volatility in our effective tax rate; • general socioeconomic and political conditions in the countries where we operate or where our products are sold or used, including the COVID-19 pandemic, U.S.-China relations and the conditions in Hong Kong; and • costs associated with litigation, especially related to intellectual property.
Factors that may affect our operating results include: • fluctuations in demand, sales cycles, product mix, and prices for our products; • the forecasting, scheduling, rescheduling or cancellation of orders by our customers; • shifts in consumer or manufacturer preferences and any resultant change in demand for our customers’ products; • changes in the competitive dynamics of our markets, including new entrants or pricing pressures; • delays in our customers’ ability to manufacture and ship products that incorporate our solutions caused by internal and external factors beyond our control; 31 • our ability to successfully define, design and release new solutions in a timely manner that meet our customers’ needs; • timely availability of adequate manufacturing capacity from our manufacturing subcontractors; • changes in manufacturing costs, including wafer, test and assembly costs, mask costs, manufacturing yields and product quality and reliability; • the timing of product announcements by our competitors or by us; • incurrence of research and development and related new products expenditures; • write-downs of inventory for excess quantities and technological obsolescence; • impairment of investment or other asset values; • future accounting pronouncements and changes in accounting policies; • volatility in our share price, which may lead to higher stock-based compensation expense; • volatility in our effective tax rate; • general socioeconomic and political conditions in the countries where we operate or where our products are sold or used, including recent macroeconomic volatility, the COVID-19 pandemic, U.S.-China relations and the conditions in Hong Kong; and • costs associated with litigation, especially related to intellectual property.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop selling products or using technology that contain the allegedly infringing intellectual property; 42 • incur significant legal expenses; • pay substantial damages to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property; • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all; or • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others.
Any potential intellectual property litigation also could force us to do one or more of the following: • stop selling products or using technology that contain the allegedly infringing intellectual property; • incur significant legal expenses; • pay substantial damages to the party whose intellectual property rights we may be found to be infringing; • redesign those products that contain the allegedly infringing intellectual property; • attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all; or • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others.
If these relationships are not successful, we may be unable to develop new products or product enhancements in a timely manner, which could result in a loss of market share, a decrease in revenue or negatively impact our operating results. We rely on third parties to provide services and technology necessary for the operation of our business.
If these relationships are not successful, we may be unable to develop new products or product enhancements in a timely manner, which could result in a loss of market share, a decrease in revenue or negatively impact our operating results. 36 We rely on third parties to provide services and technology necessary for the operation of our business.
For example, in the past we have secured design wins for camera products that were never commercially released by our customer or did not sell in volumes initially forecast by the customer, as a result of factors beyond our control. If products incorporating our SoC solutions are not commercially successful or experience rapid decline, our revenue and business will suffer.
For example, in the past we have secured design wins for customer products that were never commercially released by our customer or did not sell in volumes initially forecast by the customer, as a result of factors beyond our control. If products incorporating our SoC solutions are not commercially successful or experience rapid decline, our revenue and business will suffer.
In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information. Security breaches, computer malware and computer hacking attacks have become more prevalent and sophisticated.
In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information. Security breaches and incidents, computer malware and computer hacking attacks have become more prevalent and sophisticated.
If we were treated as a PFIC for any taxable year during which a U.S. holder held ordinary shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. 41 Changes in our United States federal income tax classification, or that of our subsidiaries, could result in adverse tax consequences to our 10% or greater U.S. shareholders.
If we were treated as a PFIC for any taxable year during which a U.S. holder held ordinary shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. Changes in our United States federal income tax classification, or that of our subsidiaries, could result in adverse tax consequences to our 10% or greater U.S. shareholders.
As a result of our international focus, we face numerous challenges and risks, including: • increased complexity and costs of managing international operations; • longer and more difficult collection of receivables; • difficulties in enforcing contracts generally; • regional economic instability; • geopolitical instability and military conflicts, including the ongoing conflict in Ukraine; • limited protection of our intellectual property and other assets; • compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs; • travel restrictions; • timing and availability of import and export licenses and other governmental approvals, permits and licenses, including export classification requirements; 29 • foreign currency exchange fluctuations relating to our international operating activities; • restrictions imposed by the U.S. government on our ability to do business with certain companies or in certain countries as a result of international political conflicts; • transportation delays and other consequences of limited local infrastructure, and disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers; • heightened risk of terrorist acts; • local business and cultural factors that differ from standards and practices in the U.S.; • differing employment practices and labor relations; • regional health issues, pandemics, and natural disasters; and • work stoppages.
As a result of our international focus, we face numerous challenges and risks, including: • increased complexity and costs of managing international operations; • longer and more difficult collection of receivables from customers; • difficulties in enforcing contracts generally; • regional economic instability; • geopolitical instability and military conflicts, including the ongoing conflict in Ukraine; • limited protection of our intellectual property and other assets; • compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs; • travel restrictions; • timing and availability of import and export licenses and other governmental approvals, permits and licenses, including export classification requirements; • foreign currency exchange fluctuations relating to our international operating activities; • restrictions imposed by the U.S. government on our ability to do business with certain companies or in certain countries as a result of international political conflicts; • transportation delays and other consequences of limited local infrastructure, and disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers; • heightened risk of terrorist acts; • local business and cultural factors that differ from standards and practices in the U.S.; • differing employment practices and labor relations; • regional health issues, pandemics, and natural disasters; and 30 • work stoppages.
The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, product distribution, financial reporting or other critical functions.
The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, ransomware and other malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, product distribution, financial reporting or other critical functions.
Any such issuance could result in substantial dilution to our existing shareholders and cause the trading price of our stock to decline. 44 We do not intend to pay dividends on our ordinary shares and, consequently, a shareholder’s ability to achieve a return on its investment will depend on appreciation in the price of our ordinary shares.
Any such issuance could result in substantial dilution to our existing shareholders and cause the trading price of our stock to decline. We do not intend to pay dividends on our ordinary shares and, consequently, a shareholder’s ability to achieve a return on its investment will depend on appreciation in the price of our ordinary shares.
Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our confidential information or that of third parties or create system disruptions. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our information systems and cause disruptions of our business.
Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our confidential information or that of third parties or create system disruptions. Computer programmers and hackers also may be able to deploy viruses, worms and other malicious software programs that attack our information systems and cause disruptions of our business.
Any significant impairment of our intellectual property rights from any litigation we face could harm our business and our ability to compete. Any potential dispute involving our patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.
Any significant impairment of our intellectual property rights from any litigation we face could harm our business and our ability to compete. 43 Any potential dispute involving our patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.
Our operations are subject to certain taxes, such as income and transaction taxes, in the Cayman Islands, the United States, China, Hong Kong, Japan, Italy, South Korea, Taiwan and other jurisdictions in which we do business.
Our operations are subject to certain taxes, such as income and transaction taxes, in the Cayman Islands, the United States, China, Hong Kong, Japan, Italy, Germany, South Korea, Taiwan and other jurisdictions in which we do business.
We may also encounter errors in corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.
We may also encounter errors resulting in corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.
Termination of the relationship with Wintech, either by us or by Wintech, could result in a temporary or permanent loss of revenue. We may not be successful in finding suitable alternative distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers.
Termination of the relationship with WT, either by us or by WT, could result in a temporary or permanent loss of revenue. We may not be successful in finding suitable alternative distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers.
If such disruption were to continue for an extended period, our customers could face delays in the launch of new products containing our solutions, resulting in delayed or decreased demand for our solutions. We have significant business operations in Taiwan, including approximately 350 employees, and many of our third-party manufacturing suppliers are located in Taiwan.
If such disruption were to continue for an extended period, our customers could face delays in the launch of new products containing our solutions, resulting in delayed or decreased demand for our solutions. We have significant business operations in Taiwan, including approximately 360 employees, and many of our third-party manufacturing suppliers are located in Taiwan.
Costs or payments made in connection with warranty and product liability claims and product recalls could harm our financial condition and results of operations, as well as harm our reputation and cause the market value of our ordinary shares to decline. 38 We are subject to governmental laws, regulations and other legal obligations related to privacy and data protection .
Costs or payments made in connection with warranty and product liability claims and product recalls could harm our financial condition and results of operations, as well as harm our reputation and cause the market value of our ordinary shares to decline. We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection and cybersecurity.
Any inability, or perceived inability, to adequately address privacy and data protection concerns, even if unfounded, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, could result in additional cost and liability to us, damage our reputation and adversely affect our business. Failure to comply with the U.S.
Any inability, or perceived inability, to adequately address privacy and data protection concerns, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, even if unfounded, could result in additional cost and liability to us, inhibit sales, damage our reputation and adversely affect our business. Failure to comply with the U.S.
We believe that our future revenue growth, if any, will significantly depend on our ability to expand within our existing IoT camera markets, such as the existing professional IP security and home security and monitoring camera markets, and successfully penetrate new markets, such as the OEM automotive, robotics and industrial markets, with our new AI computer vision SoC solutions.
We believe that our future revenue growth, if any, will significantly depend on our ability to expand within our existing IoT camera markets, such as the existing professional and home security and monitoring camera markets, and successfully penetrate new markets, such as the OEM automotive, robotics and industrial markets, with our new AI computer vision-based SoC solutions.
These factors include: • changes in financial estimates, including our ability to meet our future revenue and operating profit or loss projections; • fluctuations in our operating results or those of other semiconductor or comparable companies; 43 • fluctuations in the economic performance or market valuations of companies perceived by investors to be comparable to us; • economic developments in the semiconductor industry as a whole; • general economic conditions, including conditions caused by pandemics, and slow or negative growth of related markets; • trade and other geopolitical activities affecting markets we address; • announcements by us or our competitors of acquisitions, new products, significant contracts or orders, commercial relationships or capital commitments; • our ability to develop and market new and enhanced solutions on a timely basis; • changes in the demand for our customers’ products; • commencement of or our involvement in litigation; • disruption to our operations; • any major change in our board of directors or management; • political or social conditions in the markets where we sell our products; • changes in governmental regulations; and • changes in earnings estimates or recommendations by securities analysts.
These factors include: • changes in financial estimates, including our ability to meet our future revenue and operating profit or loss projections; • fluctuations in our operating results or those of other semiconductor or comparable companies; • fluctuations in the economic performance or market valuations of companies perceived by investors to be comparable to us; • economic developments in the semiconductor industry as a whole; • general economic conditions, including conditions related to the banking industry or caused by pandemics and high inflation, and slow or negative market growth; • trade and other geopolitical activities affecting markets we address; • announcements by us or our competitors of acquisitions, new products, significant contracts or orders, commercial relationships or capital commitments; • our ability to develop and market new and enhanced solutions on a timely basis; 44 • changes in the demand for our customers’ products; • commencement of or our involvement in litigation; • disruption to our operations; • any major change in our board of directors or management; • political or social conditions in the markets where we sell our products; • changes in governmental regulations; and • changes in earnings estimates or recommendations by securities analysts.
Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors. 45 Holders of our ordinary shares may have difficulty obtaining or enforcing a judgment against us because we are incorporated under the laws of the Cayman Islands.
Subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against the board of directors. 46 Holders of our ordinary shares may have difficulty obtaining or enforcing a judgment against us because we are incorporated under the laws of the Cayman Islands.
If such remote or work from home conditions continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.
If remote or work from home conditions were to continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.
Meeting the technical requirements and securing design wins with any of these companies will require a substantial investment of our time and resources and we cannot assure you that we will secure design wins from these or other companies or that we will achieve meaningful revenue from the sales of our solutions into these markets.
Meeting the technical requirements and securing design wins with any of these companies requires a substantial investment of our time and resources and we cannot assure you that we will secure design wins from these or other companies or that we will achieve meaningful revenue from the sales of our solutions into these markets.
Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our 2022 fiscal year or the foreseeable future.
Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our 2023 fiscal year or the foreseeable future.
Our agreement with Wintech will automatically renew for additional successive 12-month terms unless at least 60 days before the end of the then-current term either party provides written notice to the other party that it elects not to renew the agreement.
Our agreement with WT will automatically renew for additional successive 12-month terms unless at least 60 days before the end of the then-current term either party provides written notice to the other party that it elects not to renew the agreement.
Prior to purchasing our products, some of our customers, particularly in the automotive market, may require that our products and our third-party contractors undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability.
Prior to purchasing our products, some of our customers, particularly in the automotive market, may require that our products and our third-party contractors undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability of our products and our supply chain.
However, a separate determination must be made at the close of each taxable year as to whether we are a PFIC for that taxable year, and we cannot assure you that we will not be a PFIC for our 2023 fiscal year or any future taxable year.
However, a separate determination must be made at the close of each taxable year as to whether we are a PFIC for that taxable year, and we cannot assure you that we will not be a PFIC for our 2024 fiscal year or any future taxable year.
We may face difficulties, delays and increased expense as we transition our products to new processes, such as the 4nm or 3nm process node, and potentially to new foundries. We currently depend on Samsung, as the principal foundry for our products, to transition to new processes successfully.
We may face difficulties, delays and increased expense as we transition our products to new processes, such as the 4nm or 3nm process nodes, and potentially to new foundries. We currently depend on Samsung, as the principal foundry for our products, to transition to new processes successfully.
Prior to the Tax Act, we did not believe that we, or any of our non-U.S. subsidiaries, were considered a CFC, which is a determination made daily based on whether the 10% U.S. shareholders together own, or are considered to own under the attribution rules, more than fifty percent of the voting power or value of a non-U.S. corporation.
Prior to the Tax Act, we did not believe that we, or any of our non-U.S. subsidiaries, were considered a CFC, which is a determination made daily based on whether the 10% U.S. shareholders together own, or are considered to own under the attribution rules, more than 50% of the voting power or value of a non-U.S. corporation.
Notwithstanding our ability to continue to supply some SoC products to the listed entities, these customers may seek to obtain similar or substitute products from our competitors that are not subject to these limitations, or to develop similar or substitute products themselves.
Notwithstanding our ability to continue to supply some SoC products to some affiliates of the listed entities, these customers may seek to obtain similar or substitute products from our competitors that are not subject to these limitations, or to develop similar or substitute products themselves.
The application of computer vision functionality in these markets is relatively new, and we may be unable to predict the timing or development of these markets with accuracy. For example, a slower than expected adoption rate for computer vision technology in the IP security camera market could slow the demand for our new solutions.
The application of computer vision functionality in these markets is relatively new, and we may be unable to predict the timing or development of these markets with accuracy. For example, a slower than expected adoption rate for computer vision technology in automotive or IP security camera applications could slow the demand for our new solutions.
Moreover, if we are successful in achieving design wins in these new markets, it will likely take longer to generate revenue from such design wins than in our current markets.
Moreover, if we are successful in achieving design wins in these new markets, it will likely take longer to generate revenue from such design wins than in our traditional markets.
We may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. A significant portion of our solutions are sold to camera manufacturers located outside the United States, primarily in Asia.
We may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. A significant portion of our solutions are sold to customers located outside the United States, primarily in Asia.
In addition, certain of our end customers have been the subject of lawsuits alleging infringement of intellectual property rights by products incorporating our solutions, including the assertion that the alleged infringement may be attributable, at least in part, to our technology.
In addition, we and certain of our end customers have been the subject of lawsuits alleging infringement of intellectual property rights by our solutions or products incorporating our solutions, including the assertion that the alleged infringement may be attributable, at least in part, to our technology.
Our ability to accurately forecast demand can be adversely affected by a number of factors, including inaccurate forecasting by our customers, miscalculations by our customers of their inventory requirements, changes in market conditions including reductions in market activity due to the COVID-19 pandemic, adverse changes in our product order mix and fluctuating demand for our customers’ products.
Our ability to accurately forecast demand can be adversely affected by a number of factors, including inaccurate forecasting by our customers, changes in market conditions including reductions in market activity due to the COVID-19 pandemic, adverse changes in our product order mix and fluctuating demand for our customers’ products.
Sales to customers in Asia accounted for approximately 88%, 88% and 90% of our total revenue in fiscal years 2022, 2021 and 2020, respectively. Because most of our end customers or their ODM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region.
Sales to customers in Asia accounted for approximately 82%, 88% and 88% of our total revenue in fiscal years 2023, 2022 and 2021, respectively. Because most of our end customers or their ODM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region.
The Oculii acquisition and any future acquisitions may not strengthen our competitive position and may be viewed negatively by our customers, financial markets or investors, and we may not achieve our goals in a timely manner, or at all.
Any future acquisitions may not strengthen our competitive position and may be viewed negatively by our customers, financial markets or investors, and we may not achieve our goals in a timely manner, or at all.
Our operations and those of our manufacturers are vulnerable to interruption caused by technical breakdowns, computer hardware and software malfunctions, software viruses, infrastructure failures, regional health issues and pandemics, earthquakes, fires, severe storms, floods and other negative impacts from climate change, power losses, telecommunications failures, terrorist attacks, wars, Internet failures and other events beyond our control.
Our operations and those of our manufacturers are vulnerable to interruption caused by technical breakdowns, computer hardware and software malfunctions, software viruses, infrastructure failures, pandemics, including the COVID-19 pandemic and regional health issues, earthquakes, fires, severe storms, floods and other negative impacts from climate change, power losses, telecommunications failures, terrorist attacks, wars, Internet failures and other events beyond our control.
Many foreign countries and governmental bodies, including China, the European Union and other relevant jurisdictions where we conduct business, have laws and regulations concerning the collection and use of PII and other data obtained from their residents or by businesses operating within their jurisdictions that are currently more restrictive than those in the U.S.
Many foreign countries and governmental bodies, including China, the European Union and other relevant jurisdictions where we conduct business, have laws and regulations concerning the collection, use and other processing of personal information and other data obtained from their residents or by businesses operating within their jurisdictions that are more restrictive than those in the U.S.
If we fail to develop and introduce new or enhanced solutions on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. We operate in a dynamic environment characterized by rapidly changing technologies.
If we fail to develop and introduce new or enhanced solutions that meet market requirements on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. We operate in a dynamic environment characterized by rapidly changing technologies.
In future periods, our revenue and results of operations may be below the expectations of analysts and investors, which could cause the market price of our ordinary shares to decline.
In future periods, our forecasted or actual revenue and results of operations may be below the expectations of analysts and investors, which could cause the market price of our ordinary shares to decline.
Moreover, if there is a significant COVID-19 outbreak that impacts Samsung Electronic Corporation’s ability to manufacture our SoCs or our third-party contractors’ ability to assemble, test and ship our products, we could experience delays or reductions in our ability to ship products to our customers.
Moreover, if there is a significant COVID-19 outbreak that impacts Samsung’s ability to manufacture our SoCs or our third-party contractors’ ability to assemble, test and ship our products, we could experience delays or reductions in our ability to ship products to our customers.
We also cannot be certain what additional actions the U.S. government may take with respect to Hikvision, Dahua and Dajiang Baiwang , or our other China customers, including changes to the Entity List restrictions, export regulations, tariffs or other trade restrictions, or whether the Chinese government may take any actions in response to U.S. government action that may adversely affect our ability to do business with our China customers.
We also cannot be certain what additional actions the U.S. government may take with respect to any of our China customers, including changes to the Entity List restrictions, export regulations, tariffs or other trade restrictions, or whether the Chinese government may take any actions in response to U.S. government action that may adversely affect our ability to do business with our China customers.
Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with an executive management team in the United States and the majority of its employees in Asia.
Our business has grown rapidly in the past. Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with an executive management team in the United States and the majority of its employees in Asia.
Lawsuits resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights, though this has not occurred to date.
Such lawsuits could subject us to significant liability for damages and invalidate our proprietary rights, though this has not occurred to date.
Similarly, if an OEM designs one of our SoC solutions into its product, we are not assured that we will receive or continue to receive new design wins from that OEM, which could negatively impact our business. 21 If we fail to penetrate new markets, our revenue and financial condition could be harmed.
Similarly, if an OEM designs one of our SoC solutions into its product, we are not assured that we will receive or continue to receive new design wins from that OEM, which could negatively impact our business. If we fail to penetrate new markets, including the automotive OEM ADAS market, our revenue and financial condition could be harmed.
Even if we begin a product design, a customer may decide to cancel or change its product plans, resulting in no revenue from such expenditures. We are focused on selling our computer vision, video and image processing solutions to ODMs and OEMs for incorporation into their products at the design stage.
Even if we begin a product design, a customer may decide to cancel or change its product plans, resulting in no revenue from such expenditures. We are focused on selling our SoC solutions to ODMs and OEMs for incorporation into their products at the design stage.
We generally refer to ODMs as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires. Our computer vision, video and image processing SoCs are generally incorporated into our customers’ products at the design stage, which is referred to as a design win.
We generally refer to ODMs as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires. Our SoCs are generally incorporated into our customers’ products at the design stage, which is referred to as a design win.
Our gross margins and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced SoC solutions on a timely basis with higher selling prices or gross margins, or increasing our sales volumes.
Our gross margins and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced SoC solutions, such as our new AI computer vision-based solutions, on a timely basis with higher selling prices or gross margins, or increasing our sales volumes.
Our current agreement with Wintech is effective until September 2022, unless it is terminated earlier by either party for any or no reason with 60 days written notice or by failure of the breaching party to cure a material breach within 30 days following written notice of such material breach by the non-breaching party.
Our current agreement with WT is effective until January 2026, unless it is terminated earlier by either party for any or no reason with 60 days written notice or by failure of the breaching party to cure a material breach within 30 days following written notice of such material breach by the non-breaching party.
Accidental or willful security breaches or other unauthorized access by third parties to our facilities or our information systems or the existence of computer viruses in our data or software could expose us to a risk of information loss and misappropriation of proprietary and confidential information.
Accidental or willful security breaches or incidents or other unauthorized access by third parties to our facilities or our information systems or the existence of computer viruses or other malicious code or security vulnerabilities in our data or software could expose us to a risk of loss, unavailability, misappropriation and other unauthorized processing of proprietary and confidential information.
Approximately 350 of our employees are located in Taiwan and approximately 200 employees are located in China, and lengthy closures of these offices could significantly disrupt our software engineering and customer support operations.
Approximately 360 of our employees are located in Taiwan and approximately 220 employees are located in China, and lengthy closures of these offices could significantly disrupt our software engineering and customer support operations.
We also rely on a number of third-party “cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers.
We also rely on a number of third-party “cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers. These third-party service providers also are subject to similar, and in certain cases greater, security threats.
We continue to expand our staffing and increase our expenditures in anticipation of future revenue growth. If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.
In the recent years, we expanded our staffing and increased our expenditures in anticipation of future revenue growth. If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.
If any of these markets do not develop as we currently anticipate, or if the development of such markets is delayed or impacted by factors outside of our control, such as the COVID-19 pandemic, or if we are unable to penetrate them successfully with our solutions, our revenue could decline, and our financial condition would be negatively impacted.
If any of these markets do not develop as we currently anticipate, the technical requirements of these markets evolve in ways we do not anticipate, the development of such markets is delayed or impacted by factors outside of our control, or if we are unable to penetrate them successfully with our solutions, our revenue could decline and our financial condition would be negatively impacted.
In addition, we and our suppliers, third-party distributors and customers have been, and are expected to continue to be, disrupted by quarantines and restrictions on certain employees’ ability to perform their jobs, office closures or restrictions, disruptions to shipping infrastructure, or other travel or health-related restrictions.
In addition, we and our suppliers, third-party distributors and customers have been, and may in the future again be, disrupted by quarantines and restrictions on certain employees’ ability to perform their jobs, office closures or restrictions, disruptions to shipping infrastructure, or other travel or health-related restrictions.
We rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements and other contractual protections, to protect our proprietary technologies and know-how, all of which offer only limited protection.
Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements and other contractual protections, to protect our proprietary technologies and know-how, all of which offer only limited protection.
Upon expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete. 36 Any disruption to the operations of our third-party contractors and their suppliers could cause significant delays in the production or shipment of our products.
Upon expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.
The Tax Act requires complex computations not previously provided in U.S. tax law. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the period issued. As such, the application of accounting guidance for such items is currently uncertain.
The Tax Act requires complex computations not previously provided in U.S. tax law. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the period issued.
As of January 31, 2022, accounts receivable with Wintech and Chicony were approximately $23.3 million and $7.4 million, respectively. We regularly review the collectability and creditworthiness of our distributors and customers to determine an appropriate allowance for credit losses. Based on our review of our distributors and customers, we currently have only immaterial reserves for uncollectible accounts.
As of January 31, 2023, accounts receivable with WT and Chicony were approximately $21.0 million and $9.4 million, respectively. We regularly review the collectability and creditworthiness of our distributors and customers to determine an appropriate allowance for credit losses. Based on our review of our distributors and customers, we currently have only immaterial reserves for uncollectible accounts.
Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information.
Any unauthorized access by third parties to the systems of our cloud-based service providers, any other security breaches or incidents impacting such systems, or the existence of computer viruses, ransomware or other malicious code in their data or software could expose us to a risk of loss, misappropriation, unavailability and other unauthorized processing of information.
In fiscal year 2022, the customers representing 10% or more of our revenue were WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or Wintech, our distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer, which accounted for approximately 62% and 13% of total revenue, respectively.
In fiscal year 2023, the customers representing 10% or more of our revenue were WT Microelectronics Co., Ltd., or WT, our distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer, which accounted for approximately 57% and 12% of total revenue, respectively.
The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. We collect personally identifiable information, or PII, and other data as part of our business processes and activities.
The legislative and regulatory framework for privacy, data protection and cybersecurity issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. We collect and otherwise process personal information and other data as part of our business processes and activities.
The Data Security Law is the first comprehensive data security legislation in China and aims to regulate a wide range of issues in relation to the collection, storage, processing, use, provision, transaction and publication of any kind of data.
The Data Security Law is the first comprehensive data security legislation in China and aims to regulate a wide range of issues in relation to the collection, storage, processing, use, provision, transaction and publication of any kind of data. The PIPL is the first national-level law comprehensively regulating issues in relation to personal information protection in China.
We believe our future success depends in large part upon the continuing services of the members of our senior management team and various engineering and other technical personnel.
The loss of any of our key personnel could seriously harm our business. We believe our future success depends in large part upon the continuing services of the members of our senior management team and various engineering and other technical personnel.
In addition, our income tax returns are subject to continuous examination by the Internal Revenue Service, or IRS, and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
We do not expect the IRA to have a material impact on our financial statements. In addition, our income tax returns are subject to continuous examination by the Internal Revenue Service, or IRS, and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which our shareholders have purchased their shares. Investors seeking cash dividends should not purchase our ordinary shares.
There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which our shareholders have purchased their shares.
In such an eventuality, we could be forced to relocate our warehouse operations, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished SoCs to customers and logistic partners.
In addition, we could be forced to relocate our warehouse operations, either temporarily or permanently, to another potentially costlier location (or a location resulting in higher tax costs) or find alternative potentially costlier methods of shipping our finished SoCs to customers and logistic partners.
Camera manufacturers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay orders for our solutions by our customers. Our customers purchase components used in the manufacture of their cameras from various sources of supply, often involving several specialized components, including lenses, sensors, and memory chips.
Our customers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay orders for our solutions by our customers. 34 Our customers purchase components used in the manufacture of their products from various sources of supply, often involving several specialized components, including lenses, sensors, microcontrollers, power management integrated circuits (PMICs), Wi-Fi chips, and memory chips.
If we are unable to purchase wafers at favorable prices, our results of operations and financial condition will be adversely affected.
Silicon wafers constitute a material portion of our product cost and if we are unable to purchase wafers at favorable prices, our results of operations and financial condition will be adversely affected.
In addition, the Bureau of Industry and Security, or BIS, has imposed additional restrictions on exports and reexports of U.S.-controlled items to Hong Kong by removing preferential treatment that Hong Kong used to receive and imposing more stringent licensing requirements similar to those applicable to China.
The Bureau of Industry and Security, or BIS, has imposed restrictions on exports and reexports of U.S.-controlled items to Hong Kong by imposing stringent licensing requirements similar to those applicable to China.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry experienced a significant downturn during the 2008-2009 global recession.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.
The Tax Act may have changed the consequences to U.S. shareholders that own, or are considered to own, as a result of the attribution rules, ten percent or more of the voting power or value of the stock of a non-U.S. corporation (a 10% U.S. shareholder) under the U.S.
The Tax Act may have changed the consequences to U.S. shareholders that own, or are considered to own, as a result of the attribution rules, 10% or more of the voting power or value of the stock of a non-U.S. corporation (a 10% U.S. shareholder) under the U.S. federal income tax law applicable to owners of U.S. controlled foreign corporations, or CFCs.
If any of these problems are not found until after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs.
If any of these problems are not found until after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs. These problems may also result in claims against us by our customers or others.
We sell many of our products to customers through distributors who maintain their own inventory of our products for sale to ODMs and end customers. We allow limited price adjustments on sales to distributors.
We are subject to risks associated with our distributors' product inventories. 35 We sell many of our products to customers through distributors who maintain their own inventory of our products for sale to ODMs and end customers. We allow limited price adjustments on sales to distributors.
Given its recent passage, there is significant uncertainty in how regulators will interpret and enforce the law, but it contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China’s cyber and data protection regulators for cross-border personal information-related data transfers.
Significant uncertainty remains regarding how regulators will interpret and enforce these laws, but the Data Security Law contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China’s cyber and data protection regulators for cross-border personal information-related data transfers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table lists our major locations and primary usage as of January 31, 20 2 2 : Approximate Square Major Locations Footage Usage United States: Santa Clara, California 61,700 Corporate Headquarters; Sales; Marketing; Research and Development; Finance; Administration Wixom, Michigan 1,500 Business Development Beavercreek, Ohio 16,000 Research and Development Asia Pacific: Hsinchu, Taiwan 85,700 Research and Development; Business Development; Operations; Administration Shanghai, China 31,600 Research and Development; Business Development Shenzhen, China 19,200 Research and Development; Business Development Kowloon, Hong Kong 9,000 Sales; Warehousing Shin-Yokohama, Japan 1,300 Business Development SeongNam, South Korea 1,500 Business Development Europe: Parma, Italy 12,100 Research and Development
Biggest changeThe following table lists our major locations and primary usage as of January 31, 2023: Approximate Square Major Locations Footage Usage United States: Santa Clara, California 61,700 Corporate Headquarters; Sales; Marketing; Research and Development; Finance; Administration Wixom, Michigan 2,700 Business Development Beavercreek, Ohio 16,000 Research and Development Asia Pacific: Hsinchu, Taiwan 85,700 Research and Development; Business Development; Operations; Administration Shanghai, China 31,600 Research and Development; Business Development Shenzhen, China 19,200 Research and Development; Business Development Kowloon, Hong Kong 9,000 Sales; Warehousing Shin-Yokohama, Japan 1,300 Business Development SeongNam, South Korea 1,500 Business Development Europe: Parma, Italy 12,100 Research and Development
ITEM 2. PROPERTIES Our corporate headquarters are located in Santa Clara, California. These facilities accommodate our sales, marketing, research and development, finance, and administration activities. Outside of Santa Clara, California, we lease some facilities in other U.S. locations that are used for research and development and marketing activities.
ITEM 2. P ROPERTIES Our corporate headquarters are located in Santa Clara, California. These facilities accommodate our sales, marketing, research and development, finance, and administration activities. Outside of Santa Clara, California, we lease some facilities in other U.S. locations that are used for research and development and marketing activities.
Our lease obligations primarily consist of operating leases with lease periods expiring between fiscal years 2023 to 2028. 46 We believe that our existing facilities are well maintained and in good operating condition, and are sufficient for our needs for the foreseeable future.
Our lease obligations primarily consist of operating leases with lease periods expiring between fiscal years 2024 to 2028. 47 We believe that our existing facilities are well maintained and in good operating condition, and are sufficient for our needs for the foreseeable future.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of January 31, 2022, $49.0 million was available for repurchases through June 30, 2022. Since the inception of the Company’s repurchase programs in June 2016, a total of $275.0 million has been authorized, and a total of 4,011,595 shares have been repurchased for approximately $175.8 million in cash.
Biggest changeOur Board of Directors has approved extensions of the repurchase program through June 30, 2023. There were no shares repurchased in fiscal years 2023 and 2022. As of January 31, 2023, there was approximately $49.0 million available for repurchases through June 30, 2023.
Repurchases may be made from time-to-time through open market purchases, 10b5-1 plans or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate us to acquire any particular amount of ordinary shares, and it may be suspended at any time at our discretion.
Repurchases under the program may be made from time-to-time through open market purchases, 10b5-1 plans or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate us to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.
The following graph shows a comparison from February 1, 2017 through January 31, 2022 of the cumulative total return for our ordinary shares, the NASDAQ Composite Index and the Philadelphia Semiconductor Index. The comparisons in the graph are historical and are not intended to forecast or be indicative of possible future performance of our ordinary shares.
The following graph shows a comparison from February 1, 2018 through January 31, 2023 of the cumulative total return for our ordinary shares, the NASDAQ Composite Index and the Philadelphia Semiconductor Index. The comparisons in the graph are historical and are not intended to forecast or be indicative of possible future performance of our ordinary shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our ordinary shares have been traded on the NASDAQ Global Market under the symbol “AMBA” since October 10, 2012. On March 24, 2022, there were 29 shareholders of record holding our ordinary shares.
ITEM 5. M ARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our ordinary shares are traded on the NASDAQ Global Market under the symbol “AMBA”. On March 24, 2023, there were 29 shareholders of record holding our ordinary shares.
The repurchase program is funded using our working capital and any repurchased shares are recorded as authorized but unissued shares. Recent Sales of Unregistered Securities None. 49 ITEM 6. [RESERVED] 50
Repurchases are funded using working capital and any repurchased shares are recorded as authorized but unissued shares. Recent Sales of Unregistered Securities None. 50 ITEM 6. [RESERVED] 51
Securities Authorized for Issuance under Equity Compensation Plans For information about our equity compensation plans , see Note 12, “Employee Benefits and Stock-based Compensation” of the Notes to Consolidated Financial Statements included in this report . 48 Purchases of Equity Securities by the Issuer On May 29, 2019, our Board of Directors authorized a program to repurchase up to $50.0 million of our ordinary shares through June 30, 2020.
Securities Authorized for Issuance under Equity Compensation Plans For information about our equity compensation plans, see Note 12, “Employee Benefits and Stock-based Compensation” of the Notes to Consolidated Financial Statements included in this report. 49 Purchases of Equity Securities by the Issuer On March 16, 2020, we repurchased a total of 25,719 of our ordinary shares for approximately $1.0 million in cash under an authorized repurchase program up to $50.0 million.
Removed
On March 16, 2020, the Company repurchased a total of 25,719 shares for approximately $1.0 million in cash. On May 29, 2020, the Board approved an extension of this program through June 30, 2021. On May 25, 2021, the Board extended the repurchase program through June 30, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+33 added−47 removed59 unchanged
Biggest changeOur short- term and long-term capital requirements will depend on many factors, including the following: • our ability to generate cash from operations; • our ability to control our costs; • the expansion of our research and development of new technologies and products to address new markets and applications; • the magnitude and duration of COVID-19 impact; • the emergence of competing or complementary technologies or products; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or participating in litigation-related activities; and • our acquisition of complementary businesses, products and technologies. 60 Contractual Obligations, Commitments and Contingencies The following table summarizes our outstanding contractual obligations as of January 31, 2022: Payment Due by Period as of January 31, 2022 (in thousands) Less than More than All Total 1 Year 1-3 Years 3-5 Years 5 Years Other Contractual Obligations Technology licenses (1) 7,840 6,141 1,699 — — — Purchase obligations (2) 71,511 71,511 — — — — Unrecognized tax benefits, including interest (3) 9,313 — — — — 9,313 Total $ 88,664 $ 77,652 $ 1,699 $ — $ — $ 9,313 (1) Technology license obligations represent future cash payments for noncancelable internal-use software licenses which are used in product design.
Biggest changeOur short-term and long-term capital requirements will depend on many factors, including the following: • our ability to generate cash from operations; • our ability to control our costs; • the expansion of our research and development of new technologies and products to address new markets and applications; • the magnitude and duration of COVID-19 impact, as well as measures implemented to control the spread of the virus; • the emergence of competing or complementary technologies or products; • global economic and political conditions, including macroeconomic conditions, high inflation and trade restrictions; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or participating in litigation-related activities; and • our acquisition of complementary businesses, products and technologies.
While we will continue to seek to expand our end market exposure, we anticipate that sales to a limited number of end markets will continue to account for a significant percentage of our total revenue for the foreseeable future.
While we will continue to seek to expand our end market exposure, we anticipate that sales to a limited number of markets will continue to account for a significant percentage of our total revenue for the foreseeable future.
We derive a substantial portion of our revenue from sales made indirectly through one of our distributors, WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or Wintech, and directly to one of our ODM customers, Chicony Electronics Co., Ltd., or Chicony.
We derive a substantial portion of our revenue from sales made indirectly through one of our distributors, WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or WT, and directly to one of our ODM customers, Chicony Electronics Co., Ltd., or Chicony.
Net Cash Provided by Financing Activities Fiscal year 2022 compared to fiscal year 2021: Net cash provided by financing activities increased primarily due to $1.0 million of cash used for repurchasing our ordinary shares under the stock repurchase program in fiscal year 2021 that did not recur in fiscal year 2022, partially offset by $1.1 million of less cash received from option exercises and employee stock purchases.
Fiscal year 2022 compared to fiscal year 2021: Net cash provided by financing activities increased primarily due to $1.0 million of cash used for repurchasing our ordinary shares under the stock repurchase program in fiscal year 2021 that did not recur in fiscal year 2022, partially offset by $1.1 million of less cash received from option exercises and employee stock purchases.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgment and estimates: 61 Business Combination In the application of purchase accounting in a business combination, we allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair values.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgment and estimates: Business Combination In the application of purchase accounting in a business combination, we allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair values.
We estimate our customers’ product life cycles based on the customer, type of product and end market. We typically commence commercial shipments from 9 to 18 months following a design win; however, in some markets, lengthier product and development cycles are possible, depending on the scope and nature of the project, such as in the automotive OEM market.
We estimate our customers’ product life cycles based on the customer, type of product and end market. We typically commence commercial shipments from 9 to 18 months following a design win; however, in some markets, lengthier product and development cycles are possible, depending on the scope and nature of the project, such as in the automotive market.
If our operational structure was to change in such a manner that would increase the amount of operating income subject to taxation in higher-tax jurisdictions, or if we were to commence operations in jurisdictions assessing relatively higher tax rates, our effective tax rate could fluctuate significantly on a quarterly basis and/or be adversely affected.
If our operational structure were to change in such a manner that would increase the amount of operating income subject to taxation in higher-tax jurisdictions, or if we were to commence operations in jurisdictions assessing relatively higher tax rates, our effective tax rate could fluctuate significantly on a quarterly basis and/or be adversely affected.
We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers. 53 Ability to Capitalize on Connectivity Trends . Mobile connected devices are ubiquitous today and play an increasingly prominent role in consumers’ lives.
We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers. Ability to Capitalize on Connectivity Trends . Mobile connected devices are ubiquitous today and play an increasingly prominent role in consumers’ lives.
In estimating future tax consequences, generally all expected future events other than enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. 63 We apply authoritative guidance for the accounting for uncertainty in income taxes.
In estimating future tax consequences, generally all expected future events other than enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. We apply authoritative guidance for the accounting for uncertainty in income taxes.
Our solutions enable IP security camera systems to stream video content to either cloud infrastructure or connected mobile devices, and our solutions for wearable and aerial drone cameras allow consumers to quickly stream or upload video and images to social media platforms . Sales Volume .
Our solutions enable IP security camera systems to stream video content to either cloud infrastructure or connected mobile devices, and our solutions for wearable and aerial drone cameras allow consumers to quickly stream or upload video and images to social media platforms. 54 Sales Volume .
We sell our SoC solutions to leading original design manufacturers, or ODMs, and OEMs globally, and in the automotive market, we also sell to Tier-1 suppliers. We refer to ODMs and Tier-1 automotive suppliers as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires.
We sell our SoC solutions to leading original design manufacturers, or ODMs, and original equipment manufacturers, or OEMs, globally, and in the automotive market, we also sell to Tier-1 suppliers. We refer to ODMs and Tier-1 automotive suppliers as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires.
In recent years, our SoC solutions have been primarily used in camera markets, such as IP security, automotive video recorder, drone and wearable cameras.
In recent years, our SoC solutions have been primarily used in IoT camera markets, such as IP security, automotive video recorder, drone and wearable cameras.
Our end market concentration may cause our financial performance to fluctuate significantly from period to period based on the success or failure of products that our SoCs are designed into as well as the overall growth or decline in the video capture markets in which we compete.
Our limited market concentration may cause our financial performance to fluctuate significantly from period to period based on the success or failure of products that our SoCs are designed into as well as the overall growth or decline in the video capture markets in which we compete.
Our SoC designs fully integrate AI, computer vision functionality, HD video processing, image processing, audio processing, and system functions onto a single chip, delivering exceptional video and image quality at high compression rates, differentiated functionality and low power consumption.
Our SoC designs fully integrate AI, computer vision functionality, high-definition, or HD, video processing, image processing, audio processing, and system functions onto a single chip, delivering exceptional video and image quality at high compression rates, differentiated functionality and low power consumption.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a leading developer of low-power system-on-a-chip, or SoC, semiconductors providing powerful artificial intelligence, or AI, processing, advanced image signal processing and high-resolution video compression.
ITEM 7. M ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a leading developer of low-power system-on-a-chip, or SoC, semiconductors providing powerful artificial intelligence, or AI, processing, advanced image signal processing and high-resolution video compression.
Our ability to capitalize on these trends by supporting our end customers in the development of connected peripherals that seamlessly cooperate with other connected devices and allow consumers to distribute and share video and images with online media platforms is critica l for our success.
Our ability to capitalize on these trends by supporting our end customers in the development of connected peripherals that seamlessly cooperate with other connected devices and allow consumers to distribute and share video and images with online media platforms is critical for our success.
These CV-based technologies are allowing us to address a broader range of markets and applications requiring AI video features, including IP security cameras, a variety of automotive cameras, consumer cameras, and industrial and robotic markets and applications. We anticipate that our CV technology will also enable us to capture more content per electronic system.
These CV-based technologies are allowing us to address a broader range of markets and applications requiring AI video features, including IP security cameras, a variety of automotive cameras, consumer cameras, and industrial and robotic applications. We anticipate that our CV technology will also enable us to capture more content per electronic system and increase our average selling price.
We also elect not to disclose the value of unsatisfied or partially unsatisfied performance obligations due to an original expected contract duration of one year or less and elect to exclude amounts collected from customers for all sales taxes from the transaction price . Inventory Valuation We record inventories at the lower of cost or net realizable value.
We also elect not to disclose the value of unsatisfied or partially unsatisfied performance obligations for contracts with original expected contract duration of one year or less, and elect to exclude amounts collected from customers for all sales taxes from the transaction price. Inventory Valuation We record inventories at the lower of cost or net realizable value.
We also enter into fixed-price engineering service agreements with certain customers. These agreements may include multiple performance obligations, such as software development services, licensing of intellectual property and post-contract customer support, or PCS. These multiple performance obligations are highly interdependent, highly interrelated, are typically not sold separately and do not have standalone selling prices.
We also enter into various project service agreements with certain customers. These agreements may include multiple performance obligations, such as software development services, licensing of intellectual property and post-contract customer support, or PCS. These multiple performance obligations are highly interdependent, highly interrelated, are typically not sold separately and do not have standalone selling prices.
As a result, we believe that our future revenue growth, if any, will significantly depend upon our ability to expand within camera markets with our AI and computer vision technology, particularly in the professional IP security and home security and monitoring camera markets, as well as emerging markets such as AI-enabled security cameras, AI-based driving applications, including driver monitoring systems, advanced blind spot detection, object detection, and deep learning algorithms for HD mapping solutions, OEM automotive advanced driver assistance systems, or ADAS, applications, and industrial and robotics markets.
As a result, we believe that our future revenue growth, if any, will significantly depend upon our ability to expand within camera markets with our AI and computer vision technology, particularly in the Internet of Things, or IoT, markets, as well as emerging markets such as AI-enabled security cameras, AI-based driving applications, including driver monitoring systems, advanced blind spot detection, object detection, and deep learning algorithms for HD mapping solutions, automotive advanced driver assistance systems, or ADAS, applications, and industrial and robotics markets.
In the last several years, our development efforts have focused on creating advanced AI technology that enables edge devices to visually perceive the environment and make decisions based on the data collected from cameras and, most recently, other types of sensors.
Our recent development efforts have focused on creating advanced AI technology that enables edge devices to visually perceive the environment and make decisions based on the data collected from cameras and, most recently, other types of sensors.
All research and development costs are expensed as incurred. We expect our research and development expense to increase in absolute dollars as we continue to enhance and expand our product features and offerings and increase headcount for new SoC development and development of computer vision technology, especially for the OEM automotive market.
All research and development costs are expensed as incurred. We expect our research and development expense to increase in absolute dollars as we continue to enhance and expand our product features and offerings and increase headcount for new SoC development and development of computer vision technology.
The expense also includes costs of development incurred in connection with our collaborations with our foundry vendors, costs of licensing intellectual property from third parties for product development, costs of development for software and hardware tools, costs of fabrication of mask sets for prototype products, equipment expenses, outside services and allocated depreciation and facility expenses, net of any research and development grants.
The expense also includes costs of development incurred in connection with our collaborations with our foundry vendors, costs and amortization of licensing intellectual property from third parties for product development, costs of development for software and hardware tools, costs of fabrication of mask sets for prototype products, equipment expenses, outside services as well as allocated depreciation and facility expenses.
In fiscal year 2022, personnel costs increased by approximately $11.7 million as a result of issuance of stock awards, employee benefit programs and an increase in headcount. The increase was also attributable to approximately $3.8 million of acquisition-related costs associated with the acquistion of Oculii in fiscal year 2022.
In fiscal year 2022, personnel costs increased by approximately $11.7 million as a result of issuance of stock awards, employee benefit programs and an increase in headcount. The increase was also attributable to approximately $0.4 million of amortization of acquisition-related intangible assets and $3.4 million of acquisition-related costs associated with the acquisition of Oculii in fiscal year 2022.
We expect that AI and computer vision functionality will become an increasingly important requirement in many of our current and future markets, including IP security, automotive, industrial and robotics, and certain consumer markets.
We expect that AI and computer vision functionality will become an increasingly important requirement in many of our current and future markets, including IoT, automotive, industrial and robotics markets.
They are all inputs to generate one combined output which is incorporating our SoC into the customer’s product. Accordingly, we determine that they are not separately identifiable and shall be treated as a single performance obligation. Customers usually pay based on milestones achieved.
They are all inputs to generate one combined output which is incorporating our SoC into the customer’s product. Accordingly, we determine that they are not separately identifiable and shall be treated as a single performance obligation.
Moreover, achieving design wins, particularly for computer vision-centric applications in the IP security, automotive, industrial and robotics markets, is vital to our ability to generate revenue growth. As such, we closely monitor design wins by customer and end market.
Moreover, achieving design wins, particularly for computer vision-centric applications in the IoT, automotive, industrial and robotics markets, is vital to our ability to generate revenue growth. As such, we closely monitor design wins by our customers.
Stock-Based Compensation We measure stock-based compensation for equity awards granted to employees and directors based on the estimated fair value on the grant date, and recognize that compensation as expense using the straight-line attribution method for service condition awards or using the graded-vesting attribution method for awards with performance conditions over the requisite service period, which is typically the vesting period of each award.
No goodwill impairment has been identified to date based on our qualitative factors assessment. 63 Stock-Based Compensation We measure stock-based compensation for equity awards granted to employees and directors based on the estimated fair value on the grant date, and recognize that compensation as expense using the straight-line attribution method for service condition awards or using the graded-vesting attribution method for awards with performance conditions over the requisite service period, which is typically the vesting period of each award.
We anticipate that product development and product life cycles will typically be longer than 24 months in the OEM automotive, Tier-1 automotive suppliers and robotics markets, as new product introductions typically occur less frequently in these markets.
An IoT product typically has a product life cycle of 6 to 24 months. We anticipate that product development and product life cycles will typically be longer than 24 months in the OEM automotive, Tier-1 automotive suppliers and robotics markets, as new product introductions typically occur less frequently in these markets.
Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.
Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. 62 The sale of semiconductor products accounts for the substantial majority of our consolidated revenue.
We anticipate that product lifecycles will typically be longer than 24 months in the OEM automotive and industrial and robotics markets, as new product introductions occur less frequently in these markets. 51 Fiscal Year 2022 Financial Highlights and Trends • We recorded revenue of $331.9 million in fiscal year 2022, an increase of 48.8% as compared to fiscal year 2021.
We anticipate that product lifecycles will typically be longer than 24 months in the OEM automotive and industrial and robotics markets, as new product introductions occur less frequently in these markets. 52 Fiscal Year 2023 Financial Highlights and Trends • We recorded revenue of $337.6 million in fiscal year 2023, an increase of 1.7% as compared to fiscal year 2022.
Although we expect these camera markets, in particular the IP security and automotive video recorder markets, to continue to generate revenue for the foreseeable future, we have recently introduced new SoCs targeting emerging AI and computer vision applications in the IP security camera, OEM automotive, industrial and robotics markets.
Although we expect these human viewing camera markets to continue to generate revenue for the foreseeable future, we have recently introduced new SoCs targeting emerging AI and computer vision applications in the IoT, automotive, industrial and robotics markets.
Our development efforts are focused on SoCs that provide both human viewing and computer vision functionality.
Our development efforts are focused on SoCs that provide human viewing, computer vision and radar detection functionalities.
Cost of Revenue and Gross Margin Cost of revenue includes the cost of materials, such as wafers processed by third-party foundries, costs associated with packaging, assembly and testing, and our manufacturing support operations, such as logistics, planning and quality assurance.
Cost of Revenue and Gross Margin Cost of revenue includes the cost of materials, such as wafers processed by third-party foundries, costs associated with packaging, assembly, testing and manufacturing support operations, such as logistics, planning and quality assurance, as well as personnel costs (including stock-based compensation) related to project service agreements.
Our contract assets are primarily related to satisfied but unbilled performance obligations associated with engineering service agreements at the reporting date. As of January 31, 2022 and 2021 , the contract assets for these unbilled receivables were not material, respectively. Our contract liabilities consist of deferred revenue.
As of January 31, 2023 and 2022, the contract assets for these unbilled receivables were not material, respectively. Our contract liabilities consist of deferred revenue. The deferred revenue is primarily related to the nonrecurring engineering charges that are either invoiced or paid but performance obligations are not satisfied associated with project service agreements.
Results of Operations The following table sets forth our historical operating results for the periods indicated: Year Ended January 31, 2022 2021 2020 (dollars in thousands) Revenue $ 331,856 $ 222,990 $ 228,732 Cost of revenue 123,724 87,417 96,023 Gross profit 208,132 135,573 132,709 Operating expenses: Research and development 167,337 140,759 129,724 Selling, general and administrative 70,438 55,980 52,634 Total operating expenses 237,775 196,739 182,358 Loss from operations (29,643 ) (61,166 ) (49,649 ) Other income, net 1,002 3,863 8,021 Loss before income taxes (28,641 ) (57,303 ) (41,628 ) Provision (benefit) for income taxes (2,230 ) 2,483 3,164 Net loss $ (26,411 ) $ (59,786 ) $ (44,792 ) 54 The following table sets forth our historical operating results as a percentage of revenue of each line item for the periods indicated: Year Ended January 31, 2022 2021 2020 Revenue 100 % 100 % 100 % Cost of revenue 37 39 42 Gross profit 63 61 58 Operating expenses: Research and development 50 63 57 Selling, general and administrative 21 25 23 Total operating expenses 71 88 80 Loss from operations (8 ) (27 ) (22 ) Other income, net — 2 4 Loss before income taxes (8 ) (25 ) (18 ) Provision (benefit) for income taxes — 2 2 Net loss (8 ) % (27 ) % (20 ) % Revenue We derive substantially all of our revenue from the sale of HD and Ultra HD video and image processing SoC solutions to IP security camera OEMs, IP security camera ODMs, OEM automotive or Tier-1 automotive suppliers, and consumer camera OEMs, either directly or through our distributors.
Results of Operations The following table sets forth our historical operating results for the periods indicated: Year Ended January 31, 2023 2022 2021 (dollars in thousands) Revenue $ 337,606 $ 331,856 $ 222,990 Cost of revenue 128,672 123,724 87,417 Gross profit 208,934 208,132 135,573 Operating expenses: Research and development 204,946 167,337 140,759 Selling, general and administrative 78,244 70,438 55,980 Total operating expenses 283,190 237,775 196,739 Loss from operations (74,256 ) (29,643 ) (61,166 ) Other income, net 3,318 1,002 3,863 Loss before income taxes (70,938 ) (28,641 ) (57,303 ) Provision (benefit) for income taxes (5,552 ) (2,230 ) 2,483 Net loss $ (65,386 ) $ (26,411 ) $ (59,786 ) The following table sets forth our historical operating results as a percentage of revenue of each line item for the periods indicated: Year Ended January 31, 2023 2022 2021 Revenue 100 % 100 % 100 % Cost of revenue 38 37 39 Gross profit 62 63 61 Operating expenses: Research and development 61 50 63 Selling, general and administrative 23 21 25 Total operating expenses 84 71 88 Loss from operations (22 ) (8 ) (27 ) Other income, net 1 — 2 Loss before income taxes (21 ) (8 ) (25 ) Provision (benefit) for income taxes (2 ) — 2 Net loss (19 ) % (8 ) % (27 ) % 55 Revenue We derive substantially all of our revenue from the sale of HD and Ultra HD video and image processing SoC solutions to IoT OEMs, IoT ODMs, OEM or Tier-1 automotive suppliers, either directly or through our distributors.
Volume production may begin within 9 to 18 months after a design win, depending on the complexity of our customer’s product and other factors upon which we may have little or no influence. In general, design cycles will be longer in the OEM automotive and industrial and robotics markets than in the IP security and consumer device markets.
Volume production may begin within 9 to 18 months after a design win, but could be longer in certain markets, depending on the complexity of our customer’s product and other factors upon which we may have little or no influence.
In determining the transaction price, we account for the right of returns, cash rebates, commissions and other pricing adjustments as variable consideration, estimate these amounts based on the expected amount to be provided to customers and reduce the revenue recognized. We estimate sales returns and rebates based on our historical patterns of return and pricing credits.
Product sales contracts may include volume-based tiered pricing or rebates that are fulfilled in cash or product. In determining the transaction price, we account for the right of returns, cash rebates, commissions and other pricing adjustments as variable consideration, estimate these amounts based on the expected amount to be provided to customers and reduce the revenue recognized.
Net Cash Used in Investing Activities Fiscal year 2022 compared to fiscal year 2021: Net cash used in investing activities increased primarily due to $307.0 million of net cash paid for the Oculii acquisition, $4.7 million of net cash payments for long-lived assets, partially offset by $223.5 million of net cash receipts from the liquidation of all of our debt investments to finance the Oculii acquisition in fiscal year 2022. 59 Fiscal year 2021 compared to fiscal year 2020: Net cash used in investing activities increased primarily due to $25.9 million lower cash receipts from the sale and maturity of debt securities and additional payments of approximately $3.0 million in fiscal year 2021 for intangible assets purchase, which was partially offset by approximately $6.2 million lower investments in debt securities.
Fiscal year 2022 compared to fiscal year 2021: Net cash used in investing activities increased primarily due to $307.0 million of net cash paid for the Oculii acquisition, $4.7 million of net cash payments for long-lived assets, partially offset by $223.5 million of net cash receipts from the liquidation of all of our debt investments to finance the Oculii acquisition in fiscal year 2022.
The increased cash flows from operating activities were primarily due to decreased net loss, partially offset by increased inventory purchases associated with longer supply chain lead times, increased accounts receivable associated with the timing of sales and decreased liabilities associated with the timing of payments to our suppliers. • On November 5, 2021, we completed the acquisition of Oculii Corp.
Fiscal year 2022 compared to fiscal year 2021: Cash provided by operating activities increased primarily due to decreased net loss, partially offset by increased inventory purchases associated with longer supply chain lead times, increased accounts receivable associated with the timing of sales and decreased liabilities associated with the timing of payments to our suppliers.
The sale of semiconductor products accounts for the substantial majority of our consolidated revenue. Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty, supply and other rights. We consider an accepted customer purchase order, governed by sales agreement, to be the contract with the customer.
Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty, supply and other rights. We consider an accepted customer purchase order, governed by sales agreement, to be the contract with the customer. For each contract, we consider the promise to transfer tangible products to be the identified performance obligation.
We have recently introduced solutions to address emerging applications and markets, such as the incorporation of AI and computer vision functionalities for AI-enabled security cameras, AI-based driving applications and industrial and robotics markets.
We believe, however, that continued expansion into new markets is required to facilitate revenue growth and customer diversification. We have recently introduced solutions to address emerging applications and markets, such as the incorporation of AI and computer vision functionalities for AI-enabled security cameras, AI-based driving applications and industrial and robotics markets.
Cost of revenue also includes indirect costs, such as warranty, inventory valuation reserves, amortization of developed technology and other general overhead costs. We expect that our gross margin may fluctuate from period to period as a result of changes in customer mix, average selling price, product mix and the introduction of new products by us or our competitors.
We expect that our gross margin may fluctuate from period to period as a result of changes in customer mix, average selling price, product mix and the introduction of new products by us or our competitors.
Once inventory is written down, a new accounting cost basis is established and, accordingly, any associated reserve is not released until the inventory is sold or scrapped. There were no material inventory losses recognized for the fiscal years ended January 31, 2022, 2021 and 2020, respectively. Goodwill We do not amortize goodwill.
Once inventory is written down, a new accounting cost basis is established and, accordingly, any associated reserve is not released until the inventory is sold or scrapped. Goodwill We do not amortize goodwill.
Customer concentration shift from the China region to Asia region other than China and to the North America region in the professional IP security camera market also contributed to an improvement in gross margin in fiscal year 2022.
Gross margin increased in fiscal year 2022, as compared to fiscal year 2021, primarily due to a favorable product mix. A customer concentration shift from China to the Asia region other than China and to North America also contributed to an improvement in gross margin in fiscal year 2022.
In fiscal year 2022, personnel costs increased by approximately $23.7 million as a result of issuance of stock awards, employee benefit programs and an increase in headcount. Our engineering headcount increased to 671 at January 31, 2022, including 44 engineering headcount added from our acquisition of Oculii, compared to 582 at January 31, 2021.
Research and development expense increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased personnel costs and engineering related costs. In fiscal year 2022, personnel costs increased by approximately $23.7 million as a result of issuance of stock awards, employee benefit programs and an increase in headcount.
Provision (Benefit) for Income Taxes Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Provision (benefit) for income taxes $ (2,230 ) $ 2,483 $ 3,164 $ (4,713 ) (189.8 )% $ (681 ) (21.5 )% Effective tax rate 7.8% (4)% (8)% — 11.8% — 4% Income tax benefit increased in fiscal 2022, as compared to fiscal year 2021, primarily due to a decrease in the proportion of profits generated in higher tax jurisdictions, an increase in the U.S. federal research tax credit as well as an increase in tax benefits from excess stock-based compensation deductions.
Provision (Benefit) for Income Taxes Change Year Ended January 31, 2023 2022 2023 2022 2021 Amount % Amount % (dollars in thousands) Provision (benefit) for income taxes $ (5,552 ) $ (2,230 ) $ 2,483 $ (3,322 ) 149.0 % $ (4,713 ) (189.8 )% Effective tax rate 7.8% 7.8% (4)% — — — 11.8% Income tax benefit increased in fiscal 2023, as compared to fiscal year 2022, primarily due to a decrease in the proportion of profits generated in higher tax jurisdictions and the release of prior FIN48 reserves upon the lapse of the statute of limitations, partially offset by an increase in non-deductible stock-based compensation.
Other Income, Net Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Other income, net $ 1,002 $ 3,863 $ 8,021 $ (2,861 ) (74.1 )% $ (4,158 ) (51.8 )% 58 The decrease in other income, net, for fiscal year 2022, as compared to fiscal year 2021, was primarily due to lower yields from our debt security investments as a result of full liquidation of the investments in fiscal year 2022 to finance the acquisition of Oculii.
The decrease in other income, net, for fiscal year 2022, as compared to fiscal year 2021, was primarily due to lower yields from our debt security investments as a result of full liquidation of the investments in fiscal year 2022 to finance the acquisition of Oculii.
As a result, the composition and timing of our revenue may differ meaningfully during periods of technology or consumer preference changes. We expect shifts in consumer use of video capture to continue to change over time, as AI and computer vision specialized use cases emerge and video capture continues to proliferate.
We expect shifts in consumer use of video capture to continue to change over time, as AI and computer vision specialized use cases emerge and video capture continues to proliferate.
Engineering related costs, including equipment expense, outside service and facility related expenses in support of new SoCs and related software, increased by approximately $7.5 million. The increase was partially offset by decreased SoC development costs due to the timing and number of chips in development. In fiscal year 2022, SoC development costs decreased by approximately $4.4 million.
The increase was partially offset by decreased SoC development costs due to the timing and number of chips in development. In fiscal year 2022, SoC development costs decreased by approximately $4.4 million.
Selling, General and Administrative Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Selling, general and administrative $ 70,438 $ 55,980 $ 52,634 $ 14,458 25.8 % $ 3,346 6.4 % Selling, general and administrative expense increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased personnel costs and professional services in support of the Oculii acquisition and business development in the IP security, automotive and robotics markets.
Selling, general and administrative expense increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased personnel costs and professional services in support of the Oculii acquisition and business development in the IP security, automotive and robotics markets.
On March 16, 2020, we repurchased a total of 25,719 of our ordinary shares for approximately $1.0 million in cash. On May 29, 2020, the Board approved an extension of the repurchase program through June 30, 2021. On May 25, 2021, the Board extended the repurchase program through June 30, 2022.
Stock Repurchase Program On March 16, 2020, we repurchased a total of 25,719 of our ordinary shares for approximately $1.0 million in cash under an authorized repurchase program up to $50.0 million. Our Board of Directors has approved extensions of the repurchase program through June 30, 2023. There were no shares repurchased in fiscal years 2023 and 2022.
Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit . No goodwill impairment has been identified to date based on our qualitative factors assessment.
Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit .
We expect our selling, general and administrative expense to increase in absolute dollars as we continue to maintain the infrastructure and expand the size of our sales and marketing organization to support our business strategy of addressing new opportunities with our computer vision technology.
We expect our selling, general and administrative expense to increase in absolute dollars as we continue to maintain the infrastructure and expand the size of our sales and marketing organization to support our business strategy of addressing new opportunities with our computer vision technology. 56 Other Income, Net Other income, net, consists primarily of interest income and realized gains and losses from our cash deposits and debt security investments, subsidies granted by a foreign government as well as gains and losses from foreign currency transactions and remeasurements.
As we rely on third-party manufacturers for the manufacture of our products, we maintain a close relationship with these suppliers to continually monitor production yields, component costs and design efficiencies. Shifting Consumer Preferences. Our revenue is also subject to consumer preferences, regarding form factor and functionality, and how those preferences impact the video and image capture electronics that we support.
As we rely on third-party manufacturers for the manufacture of our products, we maintain a close relationship with these suppliers to continually monitor production yields, component costs and design efficiencies. Continued Concentration of Revenue by End Market .
Historically, our revenue has been significantly concentrated in a small number of end markets and we developed technologies to provide solutions for new markets as they emerged, such as the sports camera, IP security, aerial drone and automotive video recorder camera markets.
Historically, our revenue has been significantly concentrated in a small number of end markets and we developed technologies to provide solutions for new markets as they emerged. Since fiscal year 2018, the IoT markets and automotive markets have been our largest end markets and sales into these markets collectively generated the majority of our revenue.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended January 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 38,795 $ 30,800 $ 39,414 Net cash used in investing activities (119,551 ) (31,324 ) (8,576 ) Net cash provided by financing activities 10,525 10,396 6,516 Net increase (decrease) in cash, cash equivalents and restricted cash $ (70,231 ) $ 9,872 $ 37,354 Net Cash Provided by Operating Activities Fiscal year 2022 compared to fiscal year 2021: Cash provided by operating activities increased primarily due to decreased net loss, partially offset by increased inventory purchases associated with longer supply chain lead times, increased accounts receivable associated with the timing of sales and decreased liabilities associated with the timing of payments to our suppliers.
Income tax benefit increased in fiscal 2022, as compared to fiscal year 2021, primarily due to a decrease in the proportion of profits generated in higher tax jurisdictions, an increase in the U.S. federal research tax credit, as well as an increase in tax benefits from excess stock-based compensation deductions. 59 Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended January 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 44,093 $ 38,795 $ 30,800 Net cash used in investing activities (107,295 ) (119,551 ) (31,324 ) Net cash provided by financing activities 5,698 10,525 10,396 Net increase (decrease) in cash, cash equivalents and restricted cash $ (57,504 ) $ (70,231 ) $ 9,872 Net Cash Provided by Operating Activities Fiscal year 2023 compared to fiscal year 2022: Cash provided by operating activities increased primarily due to higher collections of accounts receivable associated with the timing of sales and lower inventory purchases due to customer inventory level reductions as a result of improved supply chain lead times across the semiconductor industry, partially offset by increased net loss adjusted for certain non-cash items and decreased liabilities associated with employee benefit payments and the timing of payments to our suppliers.
Fiscal year 2021 compared to fiscal year 2020: Net cash provided by financing activities increased primarily due to approximately $4.5 million of additional cash proceeds from option exercises and employee stock purchase withholding and $0.4 million lower payments for intangible assets.
Net Cash Provided by Financing Activities Fiscal year 2023 compared to fiscal year 2022: Net cash provided by financing activities decreased primarily due to approximately $4.7 million less cash proceeds from option exercises and employee stock purchase withholdings.
Once our solutions have been incorporated into a customer’s design, they are likely to be used for the life cycle of the customer’s product. Conversely, a design loss to a competitor will likely preclude any opportunity for future revenue from such customer’s product.
Conversely, a design loss to a competitor will likely preclude any opportunity for future revenue from such customer’s product.
A portable consumer device typically has a product life cycle of 6 to 18 months, while an IP security camera typically has a product life cycle of 12 to 24 months.
An IoT product typically has a life cycle of 6 to 24 months.
Additionally, the transaction price allocated to unsatisfied, or partially unsatisfied, purchase orders for contracts that are greater than a year was not material as of January 31, 2022 and 2021 , respectively.
The deferred revenue is expected to be recognized over the period when performance obligations are satisfied. Additionally, the value of unsatisfied, or partially unsatisfied, performance obligations for contracts that are greater than a year was not material as of January 31, 2023 and 2022, respectively.
If our available cash balances are insufficient to satisfy our future liquidity requirements, we may seek to sell equity or convertible debt securities or borrow funds commercially. The sale of equity and convertible debt securities may result in dilution to our shareholders, and those securities may have rights senior to those of our ordinary shares.
As we expand our operations, we may require more working capital. If our available cash balances are insufficient to satisfy our future liquidity requirements, we may seek to sell equity or convertible debt securities or borrow funds commercially.
As our standard payment terms are 30 days to 60 days, the contracts have no financing component.
We estimate sales returns and rebates based on our historical patterns of return and pricing credits. As our standard payment terms are 30 days to 60 days, the contracts have no financing component.
The decrease was also attributable to net loss from foreign currency transactions and remeasurements due to fluctuations in exchange rates. The decrease in other income, net, for fiscal year 2021, as compared to fiscal year 2020, was primarily due to lower interest and other income from our deposits and debt security investments.
The decrease was also attributable to net loss from foreign currency transactions and remeasurements due to fluctuations in exchange rates.
If we raise additional funds through the issuance of convertible debt securities or borrowing funds commercially, we may become subject to covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available to us on reasonable terms, or at all.
We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available to us on reasonable terms, or at all.
Repurchases are funded using working capital and any repurchased shares are recorded as authorized but unissued shares. Sources of Liquidity As of January 31, 2022, we had cash on hand of approximately $171.0 million, compared with approximately $440.7 million of cash, cash equivalents and marketable debt securities on hand as of January 31, 2021.
Sources of Liquidity As of January 31, 2023, we had cash, cash equivalents and marketable debt securities on hand of approximately $206.9 million, compared with approximately $171.0 million of cash on hand as of January 31, 2022. 60 Operating and Capital Expenditure Requirements As of January 31, 2023, we had cash, cash equivalents and marketable debt securities on hand of approximately $206.9 million.
These declines may be paired with improvements in manufacturing yields and lower wafer, packaging and test costs, which offset some of the margin reduction that could result from lower selling prices. 55 Research and Development Research and development expense consists primarily of personnel costs, including salaries, stock-based compensation and employee benefits.
As semiconductor products mature and unit volumes sold to customers increase, their average selling prices typically decline. These declines may be paired with improvements in manufacturing yields and lower wafer, packaging and test costs, which offset some of the margin reduction that could result from lower selling prices.
Stock Options and Restricted Stock Units Grants of stock-based awards are key components of the compensation packages we provide to attract and retain employees and to align their interests with the interests of shareholders. We recognize that these stock-based awards will dilute existing shareholders and have sought to limit the number of shares granted while providing competitive compensation packages.
We recognize that these stock-based awards will dilute existing shareholders and have sought to limit the number of shares granted while providing competitive compensation packages. As of January 31, 2023, we had a total of 3.04 million ordinary shares subject to outstanding stock options and unvested restricted stock units, which will dilute our existing shareholders.
Repurchases under the program may be made from time-to-time through open market purchases, 10b5-1 plans or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate us to acquire any particular amount of ordinary shares, and it may be suspended at any time at the company's discretion.
As of January 31, 2023, there was approximately $49.0 million available for repurchases through June 30, 2023. Repurchases under the program may be made from time-to-time through open market purchases, 10b5-1 plans or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.
In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities, and implement and enhance our information technology platforms. As we expand our operations, we may require more working capital.
We believe that our existing cash balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities, and implement and enhance our information technology platforms.
Gross margin increased in fiscal year 2021, as compared to fiscal year 2020, primarily due to a lower percentage of our total revenue coming from the professional IP security camera market at lower average selling prices. 57 Research and Development Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Research and development $ 167,337 $ 140,759 $ 129,724 $ 26,578 18.9 % $ 11,035 8.5 % Research and development expense increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased personnel costs and engineering related costs.
Research and Development Change Year Ended January 31, 2023 2022 2023 2022 2021 Amount % Amount % (dollars in thousands) Research and development $ 204,946 $ 167,337 $ 140,759 $ 37,609 22.5 % $ 26,578 18.9 % Research and development expense increased for fiscal year 2023, as compared to fiscal year 2022, primarily due to increased personnel costs, engineering-related expenses and SoC development cost.
(2) Purchase obligations consist primarily of inventory purchase obligations with our independent contract manufacturers. (3) Unrecognized tax benefits, including interest, represent our liabilities for uncertain tax positions as of January 31, 2022. We are unable to reasonably estimate the timing of payments in individual years due to uncertainties in the timing of the effective settlement of tax positions.
We are unable to reasonably estimate the timing of payments in individual years due to uncertainties in the timing of the effective settlement of tax positions. 61 We also have lease obligations primarily for our worldwide office facilities. As of January 31, 2023, these lease obligations were total of $9.0 million, with $3.8 million due in the next 12 months.
Our solutions are typically characterized by a life cycle that begins with higher average selling prices and lower volumes, followed by broader market adoption, higher volumes and average selling prices that are lower than initial levels. The end markets into which we sell our products have seen significant changes as consumer preferences have evolved in response to new technologies.
Our CV-based solutions generally have higher selling prices than our traditional video and image processing SoC solutions that do not enable CV functionality. Our solutions are typically characterized by a life cycle that begins with higher average selling prices and lower volumes, followed by broader market adoption, higher volumes and average selling prices that are lower than initial levels.
In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. 56 Comparison of the Fiscal Years Ended January 31, 20 2 2 , 202 1 and 20 20 Revenue Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Revenue $ 331,856 $ 222,990 $ 228,732 $ 108,866 48.8 % $ (5,742 ) (2.5 )% Revenue increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to continued adoption of our CV-based solutions in the IP security and automotive camera markets.
In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
As of January 31, 2022, we had a total of 3.3 million ordinary shares subject to outstanding stock options and unvested restricted stock units, which will potentially dilute our earnings per share. This potential dilution will only result if outstanding options vest and are exercised and restricted stock units vest and are settled.
This potential dilution will only result if outstanding options vest and are exercised and restricted stock units vest and are settled.
The increased operating expenses primarily related to increased personnel costs associated with headcount growth and benefit programs, increased engineering related costs for supporting automotive markets and applications of our computer vision-based solutions as well as increased professional services associated with the business combination, partially offset by decreased chip tape-out costs due to the timing and number of chips in development. • We generated cash flows from operating activities of $38.8 million in fiscal year 2022, as compared to $30.8 million in fiscal year 2021.
The increased operating expenses were partially offset by decreased acquisition-related costs associated with the acquisition of Oculii in the prior fiscal year. • We generated cash flows from operating activities of $44.1 million in fiscal year 2023, as compared to $38.8 million in fiscal year 2022.
Cost of Revenue and Gross Margin Change Year Ended January 31, 2022 2021 2022 2021 2020 Amount % Amount % (dollars in thousands) Cost of revenue $ 123,724 $ 87,417 $ 96,023 $ 36,307 41.5 % $ (8,606 ) (9.0 )% Gross profit 208,132 135,573 132,709 72,559 53.5 % 2,864 2.2 % Gross margin 62.7 % 60.8 % 58.0 % — 1.9 % — 2.8 % Cost of revenue increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased revenue.
Cost of Revenue and Gross Margin Change Year Ended January 31, 2023 2022 2023 2022 2021 Amount % Amount % (dollars in thousands) Cost of revenue $ 128,672 $ 123,724 $ 87,417 $ 4,948 4.0 % $ 36,307 41.5 % Gross profit 208,934 208,132 135,573 802 0.4 % 72,559 53.5 % Gross margin 61.9 % 62.7 % 60.8 % — (0.8 )% — 1.9 % 57 While per unit cost of product shipped largely remained unchanged, cost of revenue increased for fiscal year 2023, as compared to fiscal year 2022, primarily due to $3.6 million of additional inventory reserves and adverse purchase commitments recognized in fiscal year 2023 caused by lower demand from customers, as well as $2.1 million of additional amortization of acquisition-related intangible assets associated with business acquisitions, partially offset by lower product unit shipments driven by customer inventory level reductions as a result of improved supply chain lead times across the semiconductor industry.
The decreased operating loss was primarily due to increased revenue and gross profit, partially offset by increased operating expenses.
The higher operating loss was primarily due to higher operating expenses, partially offset by increased revenue and gross profit. The increased operating expenses primarily related to higher personnel costs, including stock-based compensation, as a result of the acquisition of Oculii Corporation, or Oculii, in late fiscal year 2022 and benefit programs.
Gross margin increased in fiscal year 2022, as compared to fiscal year 2021, primarily due to an increase in the percentage of our total revenue that was derived from the higher gross margin automotive markets.
Cost of revenue increased for fiscal year 2022, as compared to fiscal year 2021, primarily due to increased revenue.
The increased research and development expense was also attributable to additional stock-based compensation expense of approximately $1.2 million in fiscal year 2021, as a result of the issuance of stock to newly hired employees, our annual evergreen stock program for existing employees, and our annual bonus program.
Personnel costs increased by approximately $8.2 million as a result of higher stock-based compensation expense and an increase of more than 20 employees. The increase was also attributable to approximately $1.4 million of additional marketing, travel, and facility-related expenses to support our business development and an additional $1.4 million of amortization of acquisition-related intangible assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe fully liquidated our debt security investments in fiscal year 2022 to finance the acquisition of Oculii Corp. Foreign Currency Risk To date, all of our product sales and inventory purchases have been denominated in U.S. dollars. We therefore have not had any foreign currency risk associated with these two activities.
Biggest changeA hypothetical 10% change in interest rates will not have a material impact on our future interest income or investment fair value. The liquidity risk and the risk associated with fluctuating interest rates are limited to our investment portfolio. Foreign Currency Risk To date, all of our product sales and inventory purchases have been denominated in U.S. dollars.
To date, we have not entered into any foreign currency exchange contracts and currently do not expect to enter into foreign currency exchange contracts for trading or speculative purposes. 64
To date, we have not entered into any foreign currency exchange contracts and currently do not expect to enter into foreign currency exchange contracts for trading or speculative purposes. 65
The functional currency of all of our entities is the U.S. dollar. Our operations outside of the United States incur operating expenses and hold assets and liabilities denominated in foreign currencies, principally the New Taiwan Dollar, the Chinese Yuan Renminbi and the Eurozone Euro.
We therefore have not had any foreign currency risk associated with these two activities. The functional currency of all of our entities is the U.S. dollar. Our operations outside of the United States incur operating expenses and hold assets and liabilities denominated in foreign currencies, principally the New Taiwan Dollar, the Chinese Yuan Renminbi and the Eurozone Euro.
The cash equivalents and marketable debt securities consist primarily of investments in money market funds, certificates of deposit, asset-backed securities, commercial paper, U.S. government securities, and debt securities of corporations . Our cash is held primarily for working capital purpose. We do not enter into investments for trading or speculative purposes.
The cash equivalents and marketable debt securities consist primarily of investments in money market funds, commercial paper, debt securities of corporations or corporate bonds, asset-backed securities and U.S. government securities. Our cash is held primarily for working capital purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We had cash of $171.0 million at January 31, 2022 and had cash, cash equivalents and marketable debt securities totaling $440.7 million at January 31, 2021. Our cash is deposited in checking accounts with reputable financial institutions.
ITEM 7A. Q UANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We had cash, cash equivalents and marketable debt securities totaling $206.9 million at January 31, 2023 and had cash of $171.0 million at January 31, 2022.
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Our cash is deposited in checking accounts with reputable financial institutions in excess of the Federal Deposit Insurance Corporation, or FDIC, insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
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We do not enter into investments for trading or speculative purposes. 64 Interest Rate Fluctuation Risk The primary objective of our investment activities is to preserve capital, provide liquidity and maximize income without significantly increasing risk. Some of the securities we invest in are subject to market risk.
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This means that a change in prevailing interest rates may affect the interest income on our cash, cash equivalents and marketable debt securities, and the market value of those securities . To minimize this risk, we maintain our portfolio in a variety of debt securities with high liquidity and low credit risk.
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The current inflationary environment in the United States and resulting high interest rates have not had a material impact on our investment portfolio and financial position to date. We do not enter into investments for trading or speculative purposes.

Other AMBA 10-K year-over-year comparisons