AMBA Ambarella, Inc.

Risks

• 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.
• Our primary inventory warehouse is located in Hong Kong and may be affected by recent political, social and economic conditions in Hong Kong.
• If we fail to penetrate new markets, 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 customers may cancel their orders, change production quantities or delay production. If we fail to accurately forecast demand for our solutions, revenue shortfalls or excess, obsolete or insufficient inventory could result.
• 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.
• Achieving design wins is subject to lengthy competitive selection processes that require us to incur significant costs. 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.
• Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.
• We are dependent on sales of a limited number of video and image processing solutions, and a decline in market adoption of these solutions could harm our business.
• A substantial portion of our revenue is processed through a single distributor and the loss of this distributor may cause disruptions in our shipments, which may adversely affect our operations and financial condition.
• We are subject to risks associated with our distributors' product inventories.
• Deterioration of the financial conditions of our customers could adversely affect our operating results.
• The loss of any of our key personnel could seriously harm our business.
• We rely on highly skilled personnel and, if we are unable to hire, retain or motivate key personnel, we may not be able to grow effectively.
• If we do not generate revenue growth, we may not be able to execute our business plan and our operating results could suffer.
• While we intend to continue to invest in research and development, we may be unable to make the substantial investments that are required to remain competitive in our business.
• We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses.
• We may experience difficulties demonstrating the value to customers of newer, higher priced and higher margin solutions if they believe existing solutions are adequate to meet end customer expectations.
• 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.
• 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 may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.
• We rely on third-party vendors to supply software development tools to us for the development of our new products, and we may be unable to obtain the tools necessary to develop or enhance new or existing products.
• Third parties’ assertions of infringement of their intellectual property rights could result in our having to incur significant costs and cause our operating results to suffer.
• 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.
• We are subject to warranty and product liability claims and to product recalls.
• We rely on third parties to provide services and technology necessary for the operation of our business. Any failure of one or more of our vendors, suppliers or licensors to provide such services or technology could harm our business.
• We are subject to governmental laws, regulations and other legal obligations related to privacy and data protection.
• Failure to comply with the U.S. Foreign Corrupt Practices Act, or FCPA, and similar laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.
• We, our customers and third-party contractors are subject to increasingly complex environmental regulations and compliance with these regulations may delay or interrupt our operations and adversely affect our business.
• Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.
• Rapidly changing industry standards could make our video and image processing solutions obsolete, which would cause our operating results to suffer.
• We are subject to the cyclical nature of the semiconductor industry.
• Some of our operations and a significant portion of our customers and our subcontractors are located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability.
• If our operations are interrupted, our business and reputation could suffer.
• We are subject to regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002, which are costly to comply with, and our failure to comply with these requirements could harm our business and operating results.
• Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.
• Changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.
• Unfavorable tax law changes, an unfavorable governmental review of our tax returns, changes in our geographical earnings mix or imposition of withholding taxes on repatriated earnings could adversely affect our effective tax rate and our operating results.
• We may be classified as a passive foreign investment company which could result in adverse U.S. federal income tax consequences for U.S. holders of our ordinary shares.
• 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.
• Fluctuations in exchange rates between and among the currencies of the countries in which we do business may adversely affect our operating results.
• We may make acquisitions in the future that could disrupt our business, cause dilution to our shareholders, reduce our financial resources and harm our business.
• We cannot predict our future capital needs, and we may not be able to obtain additional financing to fund our operations.
• Our marketable securities portfolio could experience a decline in market value, which could materially and adversely affect our financial results.
• The market price of our ordinary shares may be volatile, which could cause the value of your investment to decline.
• If securities analysts or industry analysts downgrade our ordinary shares, publish negative research or reports or fail to publish reports about our business, our stock price and trading volume could decline.
• Our actual operating results may differ significantly from our guidance and investor expectations, which would likely cause our stock price 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.
• Provisions of our memorandum and articles of association and Cayman Islands corporate law may discourage or prevent an acquisition of us which could adversely affect the value of our ordinary shares.
• Holders of our ordinary shares may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.
• 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.