AMBARELLA INC 10-Q

ITEM 1. Financial Statements AMBARELLA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) As of July 31, January 31, 2022 2022 ASSETS Current assets: Cash and cash equivalents $ 194,944 $ 171,043 Marketable debt securities 2,970 — Accounts receivable, net 37,698 44,307 Inventories 40,103 45,219 Restricted cash 10 10 Prepaid expenses and other current assets 7,138 6,169 Total current assets 282,863 266,748 Property and equipment, net 10,443 10,134 Deferred tax assets, non-current 14,159 15,340 Intangible assets, net 49,563 46,302 Operating lease right-of-use assets, net 10,263 11,127 Goodwill 303,625 303,625 Other non-current assets 3,504 4,269 Total assets $ 674,420 $ 657,545 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 22,074 31,170 Accrued and other current liabilities 48,396 52,064 Operating lease liabilities, current 3,506 3,391 Income taxes payable 3,110 1,245 Deferred revenue, current 457 1,414 Total current liabilities 77,543 89,284 Operating lease liabilities, non-current 7,024 8,322 Other long-term liabilities 11,742 12,763 Total liabilities 96,309 110,369 Commitments and contingencies (Note 13) Shareholders' equity: Preference shares, $ 0.00045 par value per share, 20,000,000 shares authorized and no shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively — — Ordinary shares, $ 0.00045 par value per share, 200,000,000 shares authorized; 38,406,451 and 37,302,818 shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively 17 17 Additional paid-in capital 512,696 447,287 Accumulated other comprehensive loss ( 2 ) — Retained earnings 65,400 99,872 Total shareholders’ equity 578,111 547,176 Total liabilities and shareholders' equity $ 674,420 $ 657,545 See accompanying notes to condensed consolidated financial statements. 3 AMBARELLA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) (unaudited) Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 Revenue $ 80,884 $ 79,327 $ 171,189 $ 149,460 Cost of revenue 29,820 29,908 63,578 56,276 Gross profit 51,064 49,419 107,611 93,184 Operating expenses: Research and development 52,338 39,558 99,028 77,432 Selling, general and administrative 18,914 15,821 39,269 31,848 Total operating expenses 71,252 55,379 138,297 109,280 Loss from operations ( 20,188 ) ( 5,960 ) ( 30,686 ) ( 16,096 ) Other income (expense), net ( 26 ) 218 60 811 Loss before income taxes ( 20,214 ) ( 5,742 ) ( 30,626 ) ( 15,285 ) Provision for income taxes 3,436 1,414 3,846 2,689 Net loss $ ( 23,650 ) $ ( 7,156 ) $ ( 34,472 ) $ ( 17,974 ) Net loss per share attributable to ordinary shareholders: Basic $ ( 0.62 ) $ ( 0.20 ) $ ( 0.91 ) $ ( 0.50 ) Diluted $ ( 0.62 ) $ ( 0.20 ) $ ( 0.91 ) $ ( 0.50 ) Weighted-average shares used to compute net loss per share attributable to ordinary shareholders: Basic 38,258,341 36,442,536 37,986,839 36,191,420 Diluted 38,258,341 36,442,536 37,986,839 36,191,420 See accompanying notes to condensed consolidated financial statements. 4 AMBARELLA, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited, in thousands) Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 Net loss $ ( 23,650 ) $ ( 7,156 ) $ ( 34,472 ) $ ( 17,974 ) Other comprehensive loss, net of tax: Net unrealized losses on investments ( 2 ) ( 184 ) ( 2 ) ( 611 ) Other comprehensive loss, net of tax ( 2 ) ( 184 ) ( 2 ) ( 611 ) Comprehensive loss $ ( 23,652 ) $ ( 7,340 ) $ ( 34,474 ) $ ( 18,585 ) See accompanying notes to condensed consolidated financial statements. 5 AMBARELLA, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands, except share data) (unaudited) Accumulated Outstanding Additional Other Ordinary Shares Paid-in Comprehensive Retained Shares Amount Capital Income (Loss) Earnings Total Balance--January 31, 2022 37,302,818 $ 17 $ 447,287 $ — $ 99,872 $ 547,176 Issuance of shares through employee equity plans 736,516 — 8,589 — — 8,589 Issuance of shares through employee stock purchase plan 43,545 — 3,250 — — 3,250 Stock-based compensation expense — — 26,155 — — 26,155 Net loss — — — — ( 10,822 ) ( 10,822 ) Balance--April 30, 2022 38,082,879 17 485,281 — 89,050 574,348 Issuance of shares through employee equity plans 323,572 — 1,204 — — 1,204 Stock-based compensation expense — — 26,211 — — 26,211 Net unrealized losses on investments - net of tax — — — ( 2 ) — ( 2 ) Net loss — — — — ( 23,650 ) ( 23,650 ) Balance--July 31, 2022 38,406,451 $ 17 $ 512,696 $ ( 2 ) $ 65,400 $ 578,111 Accumulated Outstanding Additional Other Ordinary Shares Paid-in Comprehensive Retained Shares Amount Capital Income (Loss) Earnings Total Balance--January 31, 2021 35,547,440 $ 16 $ 347,458 $ 1,219 $ 126,283 $ 474,976 Issuance of shares through employee equity plans 643,120 — 6,741 — — 6,741 Issuance of shares through employee stock purchase plan 82,783 — 3,694 — — 3,694 Stock-based compensation expense — — 17,128 — — 17,128 Net unrealized losses on investments - net of tax — — — ( 427 ) — ( 427 ) Net loss — — — — ( 10,818 ) ( 10,818 ) Balance--April 30, 2021 36,273,343 16 375,021 792 115,465 491,294 Issuance of shares through employee equity plans 371,293 — 1,461 — — 1,461 Stock-based compensation expense — — 17,639 — — 17,639 Net unrealized losses on investments - net of tax — — — ( 184 ) — ( 184 ) Net loss — — — — ( 7,156 ) ( 7,156 ) Balance--July 31, 2021 36,644,636 $ 16 $ 394,121 $ 608 $ 108,309 $ 503,054 See accompanying notes to condensed consolidated financial statements. 6 AMBARELLA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended July 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 34,472 ) $ ( 17,974 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 9,295 5,803 Amortization (accretion) of premium (discount) on marketable debt securities, net — 852 Stock-based compensation 53,950 38,214 Deferred income taxes 1,181 215 Other non-cash items, net 42 13 Changes in operating assets and liabilities: Accounts receivable 6,609 ( 13,321 ) Inventories 5,116 ( 15,995 ) Prepaid expenses and other current assets ( 753 ) 1,033 Other non-current assets 765 435 Accounts payable ( 11,873 ) 11,992 Accrued and other current liabilities 4,380 ( 619 ) Income taxes payable 1,865 764 Deferred revenue ( 957 ) 58 Operating lease liabilities ( 2,159 ) ( 1,763 ) Other long-term liabilities 14 183 Net cash provided by operating activities 33,003 9,890 Cash flows from investing activities: Purchase of investments ( 2,972 ) ( 101,664 ) Escrow claim associated with business acquisition 749 — Sales of investments — 32,839 Maturities of investments — 75,490 Purchase of tangible and intangible assets ( 8,088 ) ( 3,754 ) Net cash provided by (used in) investing activities ( 10,311 ) 2,911 Cash flows from financing activities: Proceeds from exercise of stock options and employee stock purchase plan 4,087 7,161 Long-term financing payment for intangible assets ( 2,878 ) ( 2,834 ) Net cash provided by financing activities 1,209 4,327 Net increase in cash, cash equivalents and restricted cash 23,901 17,128 Cash, cash equivalents and restricted cash at beginning of period 171,053 241,284 Cash, cash equivalents and restricted cash at end of period $ 194,954 $ 258,412 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 661 $ 1,085 Supplemental disclosure of noncash investing and financing activities: Unpaid liabilities related to tangible and intangible assets purchases $ 3,647 $ 1,332 See accompanying notes to condensed consolidated financial statements. 7 AMBARELLA, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Summary of Significant Accounting Policies Organization Ambarella, Inc. (the “Company”) was incorporated in the Cayman Islands on January 15, 2004. The Company is a leading developer of low-power semiconductor solutions offering high-definition (HD) and Ultra HD compression, image processing, and powerful deep neural network processing. The Company combines its processor design capabilities with its expertise in video and image processing, algorithms and software to provide a technology platform that is designed to be easily scalable across multiple applications and enable rapid and efficient product development. The Company’s system-on-a-chip, or SoC, designs fully integrate high-definition video processing, image processing, artificial intelligence (AI) computer vision algorithms, audio processing and system functions onto a single chip. These low power SoCs deliver exceptional video and image quality and can extract valuable data from high-resolution video and radar streams. The Company is currently addressing a broad range of human and computer vision applications, including video security, advanced driver assistance systems (ADAS), electronic mirrors, drive recorders, driver/cabin monitoring systems, autonomous driving, and industrial and robotic applications. The Company sells its solutions to leading original design manufacturers, or ODMs, and original equipment manufacturers, or OEMs, globally. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and notes normally provided in audited financial statements. The accounting policies are described in the “Notes to Consolidated Financial Statements” in the Annual Report on Form 10-K for the 2022 fiscal year filed with the SEC on April 1, 2022 (the “Form 10-K”) and updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair statement have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Form 10-K. Basis of Consolidation The Company’s fiscal year ends on January 31. The condensed consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with U.S. GAAP. All intercompany transactions and balances have been eliminated upon consolidation. Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies described in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022. Concentration of Risk The Company’s products are manufactured, assembled and tested by third-party contractors located primarily in Asia. The Company does not have long-term agreements with these contractors. A significant disruption in the operations of one or more of these contractors would impact the production of the Company’s products which could have a material adverse effect on its business, financial condition and results of operations. A substantial portion of the Company’s revenue is derived from sales through one of its distributors, WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or WT, which serves as its non-exclusive sales representative in Asia other than Japan, and directly to one ODM customer, Chicony Electronics Co., Ltd., or Chicony. Termination of the relationships with these customers could result in a temporary or permanent loss of revenue. Furthermore, any credit issues from these customers could impair their abilities to make timely payment to the Company. See Note 14 for additional information regarding revenue and credit concentration with these customers. 8 Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable debt securities and accounts receivable. The Company maintains its cash primarily in checking accounts with reputable financial institutions. Cash deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on deposits of its cash. In order to limit the exposure of each investment, the cash equivalents and marketable debt securities consist primarily of money market funds and debt securities of corporations which management assesses to be highly liquid. The Company does not hold or issue financial instruments for trading purposes. The Company performs ongoing credit evaluation of its customers and adjusts credit limits based upon payment history and customers’ credit worthiness. The Company regularly monitors collections and payments from its customers. Restricted Cash Amounts included in restricted cash represent those required to be set aside to secure certain transactions in a foreign entity. As of July 31, 2022 and January 31, 2022, restricted cash was immaterial, respectively . The following table presents cash, cash equivalents and restricted cash reported on the condensed consolidated balance sheets, and the totals are presented on the condensed consolidated statements of cash flows: As of July 31, 2022 January 31, 2022 July 31, 2021 January 31, 2021 (in thousands) Cash and cash equivalents $ 194,944 $ 171,043 $ 258,402 $ 241,274 Restricted cash 10 10 10 10 Total as presented in the condensed consolidated statements of cash flows $ 194,954 $ 171,053 $ 258,412 $ 241,284 Recent Accounting Pronouncements None. 2. Financial Instruments and Fair Value In July 2022, the Company invested $100.0 million of cash in money market funds and debt securities of corporations after a full liquidation of its debt security investments in fiscal year 2022. All of the investments are denominated in United States dollars and reported at fair value as available-for-sale securities in the condensed consolidated balance sheets as follows: As of July 31, 2022 Amortized Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 97,068 $ — $ — $ 97,068 Corporate bonds 2,972 — ( 2 ) 2,970 Total cash equivalents and marketable debt securities $ 100,040 $ — $ ( 2 ) $ 100,038 As of January 31, 2022 Amortized Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 20 $ — $ — $ 20 Total cash equivalents and marketable debt securities $ 20 $ — $ — $ 20 As of July 31, 2022, there were no debt securities with unrealized losses for more than twelve months. As of July 31, 2022 January 31, 2022 (in thousands) Included in cash equivalents $ 97,068 $ 20 Included in marketable debt securities 2,970 — Total cash equivalents and marketable debt securities $ 100,038 $ 20 9 The contractual maturities of the investments at July 31, 2022 and January 31, 2022 were as follows: As of July 31, 2022 January 31, 2022 (in thousands) Due within one year $ 100,038 $ 20 Due within one to three years — — Total cash equivalents and marketable debt securities $ 100,038 $ 20 The unrealized gains and losses on the available-for-sale securities were primarily caused by fluctuations in market value and interest rates as a result of the economic environment. In accordance with ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company estimates the expected losses at an individual security level whenever a security’s fair value is below its amortized cost basis using the discounted cash flow method. The credit-related portion of the loss is recognized in other income (expense), net in the condensed consolidated statements of operations but is limited to the difference between the fair value and the amortized cost basis of the security, adjusted for accrued interest. The non-credit-related portion of the loss is recognized in accumulated other comprehensive loss in the condensed consolidated balance sheets. The credit-related losses were not material for the three and six months ended July 31, 2022, and 2021, respectively. The following fair value hierarchy is applied for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. Level 3—Unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation. The Company measures the fair value of money market funds using quoted prices in active markets for identical assets and classifies them within Level 1. The fair value of the Company’s investments in other debt securities are obtained based on quoted prices for similar assets in active markets and are classified within Level 2. The following tables present the fair value of the financial instruments measured on a recurring basis as of July 31, 2022 and January 31, 2022, respectively: As of July 31, 2022 Total Level 1 Level 2 Level 3 (in thousands) Money market funds $ 97,068 $ 97,068 $ — $ — Corporate bonds 2,970 — 2,970 — Total cash equivalents and marketable debt securities $ 100,038 $ 97,068 $ 2,970 $ — As of January 31, 2022 Total Level 1 Level 2 Level 3 (in thousands) Money market funds $ 20 $ 20 $ — $ — Total cash equivalents and marketable debt securities $ 20 $ 20 $ — $ — 3. Inventories Inventories at July 31, 2022 and January 31, 2022 consisted of the following: As of July 31, 2022 January 31, 2022 (in thousands) Work-in-progress $ 25,990 $ 25,844 Finished goods 14,113 19,375 Total $ 40,103 $ 45,219 10 4. Property and Equipment, Net Depreciation expense was approximately $ 0.9 million and $ 0.6 million for the three months ended July 31, 2022 and 2021, respectively, and was approximately $ 1.8 million and $ 1.2 million for the six months ended July 31, 2022 and 2021, respectively. Property and equipment at July 31, 2022 and January 31, 2022 consisted of the following: As of July 31, 2022 January 31, 2022 (in thousands) Computer hardware and software $ 18,083 $ 16,488 Tools and equipment 7,728 7,532 Furniture and fixtures 1,256 1,243 Leasehold improvements 3,080 2,942 Construction in progress 1,052 1,060 31,199 29,265 Less: accumulated depreciation and amortization ( 20,756 ) ( 19,131 ) Total property and equipment, net $ 10,443 $ 10,134 5. Intangible Assets, Net As of July 31, 2022, intangible assets primarily consist of software licenses as well as developed technology, customer relationships and trade name that were acquired from business combinations. The Company enters into certain software license agreements with third parties from time-to-time. The software licenses consist of noncancelable on premise internal-use software and software with alternative use that is to be sold, leased or otherwise marketed as part of a product. The licenses have been capitalized as intangible assets, and the corresponding future payments have been recorded as liabilities at net present value. As of July 31, 2022, $ 4.0 million was recorded in accrued and other current liabilities and $ 0.6 million was recorded in other long-term liabilities in the condensed consolidated balance sheets. The components of intangible assets as of July 31, 2022 and January 31, 2022 were as follows : As of July 31, 2022 As of January 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Software licenses $ 30,563 $ ( 14,116 ) $ 16,447 $ 22,093 $ ( 11,331 ) $ 10,762 Developed technology 21,200 ( 2,418 ) 18,782 21,200 ( 904 ) 20,296 Customer relationships 13,200 ( 1,099 ) 12,101 13,200 ( 367 ) 12,833 Trade name 2,500 ( 267 ) 2,233 2,500 ( 89 ) 2,411 Total intangible assets, net $ 67,463 $ ( 17,900 ) $ 49,563 $ 58,993 $ ( 12,691 ) $ 46,302 During the six months ended July 31, 2022, there were approximately $ 8.9 million of software licenses purchased and approximately $ 0.4 million of software licenses retired. The amortization expense associated with software licenses was approximately $ 11 1.6 million and $ 1.5 million for the three months ended July 3 1 , 202 2 and 20 2 1 , respectively , and was approximately $ 3.2 million and $ 3.0 million for the six months ended July 31, 202 2 and 202 1 , respectively . The amortization expense associated with acquisition-related intangible assets, including developed technology, customer relationships and trade name, was approximately $ 1.2 million for the three months ended July 31, 2022 and $ 2.4 million for the six months ended July 31, 2022. There was no acquisition-related amortization expense for the three and six months ended July 31, 2021. T he expected future amortization expense related to these intangible assets as of July 3 1 , 202 2 is as follows: As of July 31, 2022 Fiscal Year (in thousands) 2023 (6 months remaining) $ 5,268 2024 8,625 2025 7,110 2026 5,757 2027 5,711 Thereafter 17,092 Total future amortization expenses: $ 49,563 Intangible assets are tested for impairment at least annually, in the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that the assets may be impaired. There were no intangible asset impairments for the three and six months ended July 31, 2022 and 2021, respectively. 6. Accrued and Other Current Liabilities Accrued and other current liabilities at July 31, 2022 and January 31, 2022 consisted of the following: As of July 31, 2022 January 31, 2022 (in thousands) Accrued employee compensation $ 24,207 $ 30,044 Accrued product development costs 12,473 10,523 Software license liabilities, current 4,012 6,001 Other accrued liabilities 7,704 5,496 Total accrued and other current liabilities $ 48,396 $ 52,064 The timing of SoC development and payments to outside foundries resulted in the fluctuation of accrued product development costs. Approximately $ 10.9 million of annual bonus was paid in the first quarter of fiscal year 2023, of which $ 3.2 million was paid in cash and $ 7.7 million was settled with restricted stock units. 7. Leases The Company enters into various operating leases for its worldwide facilities. In the second quarter of fiscal year 2023, the Company extended leases for its Shenzhen office and one of its facilities in Santa Clara, California for an additional two years beginning October 1, 2022 to September 30, 2024 . For the lease extensions, the Company recorded an increase to the operating lease right-of-use (ROU) assets and corresponding operating lease liabilities of approximately $ 0.8 million in the condensed consolidated balance sheets. Operating lease expense was approximately $ 0.9 million and $ 0.8 million for the three months ended July 31, 2022 and 2021, respectively, and was approximately $ 1.8 million and $ 1.6 million for the six months ended July 31, 2022 and 2021, respectively. The Company's short-term leases and finance leases were not material as of July 31, 2022 and January 31, 2022, respectively . Supplemental cash flow information related to the operating leases is as follows: Three Months Ended Six Months Ended July 31, 2022 July 31, 2022 (in thousands) Cash paid for operating leases included in operating cash flows $ 1,090 $ 2,159 Supplemental non-cash information related to lease liabilities arising from obtaining right-of-use assets $ 83 $ 170 Leased assets obtained in exchange for operating lease liabilities arising from lease modifications $ 810 $ 810 12 As of July 31, 2022, the weighted average remaining lease term is 3.09 years, and the weighted average discount rate is 3.57 percent. Future minimum lease payments for the lease liabilities are as follows : As of July 31, 2022 Fiscal Year (in thousands) 2023 (6 months remaining) $ 1,881 2024 3,797 2025 3,467 2026 1,416 2027 340 Thereafter 119 Total future annual minimum lease payments 11,020 Less: interest ( 490 ) Total lease liabilities $ 10,530 8. Other Long-Term Liabilities Other long-term liabilities at July 31, 2022 and January 31, 2022 consisted of the following: As of July 31, 2022 January 31, 2022 (in thousands) Unrecognized tax benefits, including interest $ 9,548 $ 9,313 Deferred tax liabilities, non-current 1,551 1,769 Software license liabilities, non-current 638 1,674 Other long-term liabilities 5 7 Total other long-term liabilities $ 11,742 $ 12,763 9. Capital Stock Preference shares After completion of the Company’s initial public offering in 2012, a total of 20,000,000 preference shares, with a $ 0.00045 par value per share, were authorized. There were no preference shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively. Ordinary shares As of July 31, 2022 and January 31, 2022, a total of 200,000,000 ordinary shares were authorized. In the first quarter of fiscal year 2023, the Company added 466,285 ordinary shares to the ordinary shares reserved for issuance, pursuant to an “evergreen” provision contained in the Amended and Restated 2012 Employee Stock Purchase Plan, or ESPP. Pursuant to such provision, for each fiscal year, the number of ordinary shares reserved for issuance under the ESPP is automatically increased by a number equal to the lesser of (i) 1,500,000 ordinary shares, (ii) one and one quarter percent ( 1.25 %) of the aggregate number of ordinary shares outstanding on February 1 st of each fiscal year, or (iii) an amount determined by the Company’s Board of Directors or a duly authorized committee of the Board of Directors. As of July 31, 2022 and January 31, 2022, the following ordinary shares were reserved for future issuance under the Company’s equity plans and ESPP: As of July 31, 2022 January 31, 2022 Shares reserved for options, restricted stock and restricted stock units under equity plans 6,399,750 7,461,541 Shares reserved for ESPP 3,047,444 2,624,704 13 Stock repurchase program On May 27, 2022 , the Company ’ s Board of Directors approved an extension of the current share repurchase program for an additional twelve months ending June 30, 2023 . There were no ordinary shares repurchased in the six months ended July 31, 2022. As of July 31, 2022, there was approximately $ 49.0 million available for repurchases under the current repurchase program 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 the Company to acquire any particular amount of ordinary shares, and it may be suspended at any time at the Company’s discretion. The repurchase program is funded using the Company’s working capital and any repurchased shares are recorded as authorized but unissued shares. 10. Stock-based Compensation The following table presents the classification of stock-based compensation for the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands) Stock-based compensation: Cost of revenue $ 362 $ 359 $ 711 $ 682 Research and development 17,883 11,525 35,034 22,719 Selling, general and administrative 8,664 7,488 18,205 14,813 Total stock-based compensation $ 26,909 $ 19,372 $ 53,950 $ 38,214 As of July 31, 2022, approximately $ 1.7 million of stock-based compensation expense was accrued and reflected under accrued and other current liabilities in the condensed consolidated balance sheets. Total unrecognized compensation cost related to unvested stock options at July 31, 2022 was $ 21.7 million and is expected to be recognized over a weighted-average period of 2.20 years. Total unrecognized compensation cost related to unvested restricted stock units at July 31, 2022 was $ 189.2 million and is expected to be recognized over a weighted-average period of 2.30 years. In April 2022, the Company’s Compensation Committee of the Board of Directors approved the acceleration of vesting of 35,703 shares of unvested equity awards associated with the departure of Mr. Casey Eichler, who was the Company’s Chief Financial Officer until March 2022. As a result, there was approximately $ 1.7 million of additional stock-based compensation expense, net related to the departure recognized in fiscal year 2023. The following table sets forth the weighted-average assumptions used to estimate the fair value of stock options and employee stock purchase plan awards for the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 Stock Options: Volatility — 50 % — 51 % Risk-free interest rate — 0.85 % — 0.98 % Expected term (years) — 5.06 — 5.27 Dividend yield — 0 % — 0 % Employee stock purchase plan awards: Volatility — — 89 % 61 % Risk-free interest rate — — 0.86 % 0.06 % Expected term (years) — — 0.5 0.5 Dividend yield — — 0 % 0 % The following table summarizes stock option activities for the period indicated: 14 Option Outstanding Weighted- Total Intrinsic Average Weighted- Value Of Remaining Aggregate Weighted- Average Options Contractual Intrinsic Average Grant-date Exercised Term Value Shares Exercise Price Fair Value (in thousands) (in years) (in thousands) Outstanding at January 31, 2022 619,322 $ 40.08 Granted — — — Exercised ( 64,395 ) 32.20 $ 3,878 Forfeited ( 6,323 ) 45.88 Expired ( 518 ) 10.89 Outstanding at July 31, 2022 548,086 40.97 4.68 $ 25,303 Exercisable at July 31, 2022 386,400 $ 43.27 3.59 $ 16,853 The intrinsic value of options outstanding and exercisable is calculated based on the difference between the fair market value of the Company’s ordinary shares on the reporting date and the exercise price. The closing price of the Company’s ordinary shares on July 29, 2022 was $ 86.55 , as reported by The NASDAQ Global Market. The intrinsic value of exercised options is calculated based on the difference between the fair market value of the Company’s ordinary shares on the exercise date and the exercise price. The following table summarizes restricted stock unit activities for the period indicated: Weighted- Average Grant-Date Shares Fair Value Unvested at January 31, 2022 2,651,135 $ 85.41 Granted 708,985 85.87 Vested ( 995,693 ) 68.42 Forfeited ( 61,722 ) 100.28 Unvested at July 31, 2022 2,302,705 $ 92.87 As of July 31, 2022, the aggregate intrinsic value of unvested restricted stock units was $ 199.3 million. 11. Net Loss Per Ordinary Share The following table sets forth the computation of basic and diluted loss per ordinary share for the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands, except share and per share data) Numerator: Net loss $ ( 23,650 ) $ ( 7,156 ) $ ( 34,472 ) $ ( 17,974 ) Denominator: Weighted-average ordinary shares - basic 38,258,341 36,442,536 37,986,839 36,191,420 Weighted-average ordinary shares - diluted 38,258,341 36,442,536 37,986,839 36,191,420 Net loss per ordinary share: Basic $ ( 0.62 ) $ ( 0.20 ) $ ( 0.91 ) $ ( 0.50 ) Diluted $ ( 0.62 ) $ ( 0.20 ) $ ( 0.91 ) $ ( 0.50 ) 15 The following weighted-average potentially dilutive securities were excluded from the computation of diluted loss per ordinary share as their effect would have been antidilutive: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 Options to purchase ordinary shares 328,198 367,880 370,069 397,871 Restricted stock units 1,463,284 1,528,946 1,620,052 1,657,599 Employee stock purchase plan 11,456 714 11,233 11,792 1,802,938 1,897,540 2,001,354 2,067,262 12. Income Taxes The following table provides details of income taxes for the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands) Loss before income taxes $ ( 20,214 ) $ ( 5,742 ) $ ( 30,626 ) $ ( 15,285 ) Provision for income taxes 3,436 1,414 3,846 2,689 Effective tax rate ( 17.0 )% ( 24.6 )% ( 12.6 )% ( 17.6 )% The Company recorded an income tax provision of $ 3.4 million and $ 1.4 million for the three months ended July 31, 2022 and 2021, and $ 3.8 million and $ 2.7 million for the six months ended July 31, 2022 and 2021, respectively. The increase in income tax expense for the three and six months ended July 31, 2022 was primarily due to a decrease in the U.S. federal research tax credit, a decrease in tax benefits from excess stock-based compensation deductions as well as an increase in non-deductible stock-based compensation, partially offset by a decrease in the proportion of profits generated in higher tax jurisdictions. The Company files federal and state income tax returns in the United States and in various foreign jurisdictions. The Internal Revenue Service is currently examining the Company’s U.S. federal income tax return for the fiscal year ended January 31, 2017. The tax years 2013 to 2021 remain open to examination by U.S. federal tax authorities. The tax years 2009 to 2021 remain open to examination by U.S. state tax authorities. The tax years 2015 to 2021 remain open to examination by foreign tax authorities. Fiscal years outside of the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those earlier years, which have been carried forward and may be audited in subsequent years when utilized. The Company regularly assesses the likelihood of adverse outcomes resulting from potential tax examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of July 31, 2022, the gross amount of unrecognized tax benefits was approximately $ 31.3 million. If the estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense could be required. If events occur, and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities could result in tax benefits being recognized in the period in which the Company determines the liabilities are no longer necessary. The Company does not anticipate significant changes to its uncertain tax positions during the next twelve months. 13. Commitments and Contingencies Contract Manufacturer Commitments The Company’s components and products are procured and built by independent contract manufacturers based on sales forecasts. These forecasts include estimates of future demand, historical trends, analysis of sales and marketing activities, and adjustment of overall market conditions. The Company regularly issues purchase orders to independent contract manufacturers which are cancelable upon agreement between the Company and the third-party manufacturers. These manufacturing purchase commitments typically provide the Company with flexibility to cancel, reschedule or adjust requirements based upon business needs but the Company may incur certain costs depending on the production stage of the products. As of July 31, 2022 and January 31, 2022, total manufacturing purchase commitments were approximately $ 68.3 million and $ 71.5 million, respectively. The Company also reviews and assesses the need for any expected loss liabilities on quarterly basis for all products that it does not expect to sell for which it has committed purchases from suppliers. As of July 31, 2022, an approximately $ 1.9 million loss was recognized in the condensed consolidated balance sheets from adverse purchase commitments. There were no material loss liabilities recorded in the condensed consolidated balance sheets from adverse purchase commitments as of January 31, 2022. 16 Indemnification The Company, from time to time, in the normal course of business, indemnifies certain vendors with whom it enters into contractual relationships. The Company has agreed to hold the other party harmless against third-party claims in connection with the Company’s future products. The Company also indemnifies certain customers against third-party claims related to certain intellectual property and product liability matters. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. The Company has no t made payments under these obligations, and no liabilities have been recorded for these obligations in the condensed consolidated balance sheets as of July 31, 2022 and January 31, 2022, respectively. Other Matters From time to time, the Company is subject to commercial disputes, employment issues, intellectual property claims and litigation, in the ordinary course of its business . Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is the Company’s belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on its consolidated financial position. The results of any litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. 14. Segment Reporting The Company operates in one reportable segment related to the development and sales of low-power, high-definition (HD), Ultra HD video compression, image processing and computer vision solutions. The Chief Executive Officer of the Company has been identified as the Chief Operating Decision Maker (the “CODM”) and manages the Company’s operations as a whole. For the purpose of evaluating financial performance and allocating resources, the CODM reviews financial information presented on a consolidated basis accompanied by information by customer and geographic region. Geographic Revenue The following table sets forth the Company’s revenue by geographic region based on bill-to location for the periods indicated: Three Months Ended July 31, Six Months Ended July 31, 2022 2021 2022 2021 (in thousands) Taiwan $ 49,805 $ 49,136 $ 103,441 $ 93,723 Asia Pacific 17,844 20,162 39,399 38,799 Europe 4,479 4,387 12,872 7,405 North America other than United States 4,386 4,443 9,272 7,133 United States 4,370 1,199 6,205 2,400 Total revenue $ 80,884 $ 79,327 $ 171,189 $ 149,460 As of July 31, 2022, substantially all of the Company’s property and equipment were located in the Asia Pacific region, United States and Europe with approximate net amounts of $ 5.3 million, $ 3.6 million and $ 1.6 million, respectively. Major Customers For the three and six months ended July 31, 2022, the customers representing 10% or more of revenue and accounts receivable were WT and Chicony, which accounted for approximately 59.4 % and 12.9 % of total revenue for the three months ended July 31, 2022, respectively, and accounted for approximately 57.9 % and 12.1 % of total revenue for the six months ended July 31, 2022, respectively. For the three and six months ended July 31, 2021, the customers representing 10% or more of revenue and accounts receivable were WT and Chicony, which accounted for approximately 61.6 % and 15.8 % of total revenue for the three months ended July 31, 2021, respectively, and accounted for approximately 62.4 % and 15.8 % of total revenue for the six months ended July 31, 2021, respectively. Accounts receivable with WT and Chicony were approximately $ 16.2 million and $ 10.5 million, respectively, as of July 31, 2022. 17