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Ambarella Inc. (AMBA - Free Report) started fiscal 2018 on a strong note, reporting better-than-expected results for first-quarter fiscal 2018. Also, revenues and earnings marked a significant year–over-year improvement.
The company reported earnings of 7 cents per share, which came ahead of the Zacks Consensus Estimate of 3 cents and also registered a year-over-year jump of 40%. The year-over-year improvement was mainly driven by solid top-line growth which was partially offset by higher costs and expenses, as well as increase in number of outstanding shares.
Quarter in Detail
The fiscal first-quarter revenues increased 12.2% year over year to $64.1 million and came ahead of the Zacks Consensus Estimate of $63 million. Excluding sales to GoPro Inc. (GPRO - Free Report) and OEMs, revenues increased 16.1%.
The solid year-over-year growth was primarily driven by strong performances at IP security, auto and non-GoPro wearable markets. The benefits at these markets were partially offset by decline in drone revenues.
Gross margin contracted 30 basis points (bps) to 63.9% in the reported quarter. On non-GAAP basis (excluding stock-based compensation), the company reported gross margin of 64.3%, which came 30 bps lower than the year-ago quarter. The contraction in gross margin was mainly due to increase in revenues from sales of lower margin China security and U.S. home monitoring products, as well as a decline in higher margin sports camera market revenues.
Operating expenses increased 8.4% year over year to $38.3 million. On non-GAAP basis, operating expenses came in at $25.7 million, up from $24.3 million incurred in first-quarter fiscal 2017. The year-over-year increase in non-GAAP operating expenses was mainly due to increase in headcount and chip development costs.
Operating income almost doubled to $2.6 million from $1.3 million reported in the year-ago quarter. Operating margin expanded 170 bps to 4.1% in the reported quarter.
Ambarella ended the fiscal first quarter with cash and cash equivalents & marketable securities of $420.2 million, up from $405.4 million in the previous quarter.
During the reported quarter, the company bought back 162,738 shares under its ongoing $75 million share repurchase program which started in Jun 2016, for a total consideration of $8.77 million. As of Apr 30, 2017, the company has approximately $46 million available under the current share repurchase authorization.
Guidance
For second-quarter fiscal 2018, revenues are expected to be between $69 million and $72 million, up 6–10.6% from the prior-year quarter. The company anticipates strong year-over-year revenue growth in IP security (both professional and consumer), as well as solid growth in automotive and non-sports wearable, partially offset by a decline in the drone revenues. However, the company’s guided range fell short of the Zacks Consensus Estimate of $72.6 million.
Non-GoPro revenues in the fiscal second quarter are expected to grow between 11.8% and 17%.
Non-GAAP gross margin is expected to be between 62.0% and 63.5% as compared with 67.1% in the year-ago quarter. The contraction will be due to increase in China security revenues and decline in drone revenues.
Operating expenses are expected to be between $26.0 million and $27.5 million, up sequentially due to higher head count expenses and increase in new chip development costs.
Management reiterated its forecasts for fiscal 2018. The company still expects revenues to be in the range of up 3% to down 3% as compared with fiscal year 2017. Strong growth in IP security, drones, non-sports wearable, and automotive market revenues will drive revenues. Excluding sales to GoPro and its ODMs, fiscal year 2018 revenues are estimated to grow between 20% and 32%.
Gross margins are expected to move into the high end of Ambarella’s target margin range of 59–62%, while operating expense is expected to increase 12–14% over fiscal year 2017.
Bottom Line
Despite reporting better-than-expected fiscal first-quarter results, shares of Ambarella declined approximately 6% in yesterdays’ after-hour trade, as its revenue forecast for the fiscal second quarter fell short of analyst’s expectations.
Notably, Ambarella has underperformed the Zacks Electronics-Semiconductors industry in the year-to-date period. The stock returned 10.4%, while the industry gained 28.8% in the said period.
Currently, Ambarella carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the Electronics-Semiconductors space are Applied Optoelectronics, Inc. (AAOI - Free Report) and Broadcom Limited (AVGO - Free Report) . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS growth rate for Applied Optoelectronics and Broadcom is 20% and 13.6%, respectively.
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Ambarella's (AMBA) Q1 Earnings & Revenues Beat Estimates
Ambarella Inc. (AMBA - Free Report) started fiscal 2018 on a strong note, reporting better-than-expected results for first-quarter fiscal 2018. Also, revenues and earnings marked a significant year–over-year improvement.
The company reported earnings of 7 cents per share, which came ahead of the Zacks Consensus Estimate of 3 cents and also registered a year-over-year jump of 40%. The year-over-year improvement was mainly driven by solid top-line growth which was partially offset by higher costs and expenses, as well as increase in number of outstanding shares.
Quarter in Detail
The fiscal first-quarter revenues increased 12.2% year over year to $64.1 million and came ahead of the Zacks Consensus Estimate of $63 million. Excluding sales to GoPro Inc. (GPRO - Free Report) and OEMs, revenues increased 16.1%.
The solid year-over-year growth was primarily driven by strong performances at IP security, auto and non-GoPro wearable markets. The benefits at these markets were partially offset by decline in drone revenues.
Gross margin contracted 30 basis points (bps) to 63.9% in the reported quarter. On non-GAAP basis (excluding stock-based compensation), the company reported gross margin of 64.3%, which came 30 bps lower than the year-ago quarter. The contraction in gross margin was mainly due to increase in revenues from sales of lower margin China security and U.S. home monitoring products, as well as a decline in higher margin sports camera market revenues.
Operating expenses increased 8.4% year over year to $38.3 million. On non-GAAP basis, operating expenses came in at $25.7 million, up from $24.3 million incurred in first-quarter fiscal 2017. The year-over-year increase in non-GAAP operating expenses was mainly due to increase in headcount and chip development costs.
Operating income almost doubled to $2.6 million from $1.3 million reported in the year-ago quarter. Operating margin expanded 170 bps to 4.1% in the reported quarter.
Ambarella, Inc. Price, Consensus and EPS Surprise
Ambarella, Inc. Price, Consensus and EPS Surprise | Ambarella, Inc. Quote
Balance Sheet
Ambarella ended the fiscal first quarter with cash and cash equivalents & marketable securities of $420.2 million, up from $405.4 million in the previous quarter.
During the reported quarter, the company bought back 162,738 shares under its ongoing $75 million share repurchase program which started in Jun 2016, for a total consideration of $8.77 million. As of Apr 30, 2017, the company has approximately $46 million available under the current share repurchase authorization.
Guidance
For second-quarter fiscal 2018, revenues are expected to be between $69 million and $72 million, up 6–10.6% from the prior-year quarter. The company anticipates strong year-over-year revenue growth in IP security (both professional and consumer), as well as solid growth in automotive and non-sports wearable, partially offset by a decline in the drone revenues. However, the company’s guided range fell short of the Zacks Consensus Estimate of $72.6 million.
Non-GoPro revenues in the fiscal second quarter are expected to grow between 11.8% and 17%.
Non-GAAP gross margin is expected to be between 62.0% and 63.5% as compared with 67.1% in the year-ago quarter. The contraction will be due to increase in China security revenues and decline in drone revenues.
Operating expenses are expected to be between $26.0 million and $27.5 million, up sequentially due to higher head count expenses and increase in new chip development costs.
Management reiterated its forecasts for fiscal 2018. The company still expects revenues to be in the range of up 3% to down 3% as compared with fiscal year 2017. Strong growth in IP security, drones, non-sports wearable, and automotive market revenues will drive revenues. Excluding sales to GoPro and its ODMs, fiscal year 2018 revenues are estimated to grow between 20% and 32%.
Gross margins are expected to move into the high end of Ambarella’s target margin range of 59–62%, while operating expense is expected to increase 12–14% over fiscal year 2017.
Bottom Line
Despite reporting better-than-expected fiscal first-quarter results, shares of Ambarella declined approximately 6% in yesterdays’ after-hour trade, as its revenue forecast for the fiscal second quarter fell short of analyst’s expectations.
Notably, Ambarella has underperformed the Zacks Electronics-Semiconductors industry in the year-to-date period. The stock returned 10.4%, while the industry gained 28.8% in the said period.
Currently, Ambarella carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the Electronics-Semiconductors space are Applied Optoelectronics, Inc. (AAOI - Free Report) and Broadcom Limited (AVGO - Free Report) . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS growth rate for Applied Optoelectronics and Broadcom is 20% and 13.6%, respectively.
3 Stocks to Ride a 588% Revenue Explosion
At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold.
By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >>