Valens Semiconductor Ltd. Q4 FY2022 Earnings Call

Good morning. My name is Yoni, and I will be your conference operator today. At this time, I would like to welcome everyone to Valens Semiconductor's Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. I will now turn the call over to Daphna Golden, Vice President of Investor Relations for Valens Semiconductor. Please go ahead.

Thank you, and welcome everyone to Valens Semiconductor's Fourth Quarter and Full Year 2022 Earnings Call. With me today are Gideon Ben-Zvi, Chief Executive Officer; and Dror Heldenberg, Chief Financial Officer. Earlier today, we issued a press release that is available on the Investor Relations section of our website under investors.valens.com. As a reminder, today's earnings call may include forward-looking statements and projections, which do not guarantee future events or performance. These statements are subject to the safe harbor language in today's press release. Please refer to our annual report on Form 20-F filed today with the SEC for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. We will be discussing certain non-GAAP measures on this call, which we believe are relevant in assessing the financial performance of the business, and you can find reconciliations of these metrics within our earnings release. In the coming weeks, we will be in California and in Europe for investor conferences and meetings. If you're interested in meeting with us, please e-mail me at investors@valens.com. With that, I will now turn the call over to Gideon.

Thanks Daphna, and thank you, everyone, for joining our call. 2022 was a year of many successes for Valens Semiconductor. In 2022, Valens Semiconductor continued to strengthen its leadership position in the audio-video market and focused on increasing its share also in the automotive space. A record number of Valens Semiconductor audio-video and automotive chipsets were sold for use in diversified business activities that support people's daily lives. We accomplished record revenues of $90.7 million, driven mainly by greater-than-expected revenues in audio-video, and we doubled our annual automotive sales. We also achieved better-than-anticipated gross margin and adjusted EBITDA and are well on the way to achieving an important milestone of adjusted EBITDA breakeven by the end of this year, 2023. Looking at the most recent quarter, Q4 2022, the trend of growth continued, and our revenues reached a record of $23.5 million, up 13% from Q4 2021. We also achieved better-than-anticipated profitability metrics. We believe Valens Semiconductor is well positioned to address the near and long-term opportunities in the markets that we serve for four reasons. First, we benefit from being an industry standard leader in both audio-video and automotive, which are two large and growing markets. Second, we leverage our disruptive connectivity offerings across both of our business segments. This is expected to help us enrich our product offering and accelerate the ROI on new products. Third, we are expanding the ecosystem towards mass production of our automotive VA7000 A-PHY compliance chipsets. Fourth, our continued investment in new products to augment our disruptive offerings for both markets. Turning to our segments, starting with audio-video. In 2022, we continued to expand our footprint in the audio-video market into new applications and verticals such as education, corporate, medical, and industrial. In education, we are very proud that the largest public county school district in Florida, which is the fourth largest in the United States, has selected our audio-video products to modernize its classrooms. This district has over 330,000 students. As part of an awarded elementary and secondary school emergency relief known as the ESSER initiative, they selected Valens’ USB and power extension products together with Logitech’s meet-up video conferencing camera for a better hybrid in-class and remote educational experience. One of their main goals is to prepare for and avoid future closures of schools to enable continuous learning and improved student achievements. With our video conferencing extension solutions, teachers and students can now efficiently teach and learn regardless of the physical locations, opening up possibilities to boost knowledge retention and achievement at all locations. The first phase of installation has been completed, and we look forward to implementing the next steps. In corporate, Puma, the well-known sports brand announced in Q4 that Crestron Electronics, a leading electronics company and one of our longest-serving audio-video customers completed the installation of a presentation system in their new North American headquarters in Boston. The system, which incorporates Valens Semiconductor chipsets answered Puma's need for seamless communication between its employees by offering one unified meeting room experience, replicating a consistent experience across their conference rooms that are using Microsoft Teams-enabled rooms. These two examples demonstrate how remote and hybrid work and education models, which are here to stay, require equipping spaces with the proper audio and video distribution solutions to foster equity, increase efficiency, and accommodate a better in-room experience for both small and large groups. Our products were also recently deployed by a healthcare organization, upgrading the Orbis Flying Eye Hospital airplane, which features a teaching facility, an operating room, a classroom, and a recovery room. I decided to share this example as it demonstrates how Valens Semiconductor and its customers help make the world a better place. Orbis is an international charity working to make eye care available everywhere for everyone, so no one has to experience the consequence of avoidable blindness. Its mission is to use a network of partners, supporters, medical professionals, and sector-leading volunteers to empower local communities to fight blindness and restore vision. The Orbis Flying Eye Hospital staff travel worldwide to share their knowledge and expertise with local eye care teams. They required resilient technology solutions to provide the best training opportunities to eye care professionals around the world, serving communities in need that have limited access to such services. We are proud to be part of this critical mission. We continue to invest in expanding our offerings for audio-video verticals. We believe that as the need for efficient, lower-cost, higher connectivity bandwidth alternatives increases, there will be new opportunities to expand our business and customer base. For example, in 2021, we introduced the VS3000 chipset family, which enables our customers to innovate and design products across industries. Our VS3000, which extends uncompressed 4K 60 frames per second resolution videos, is one of the most advanced integrated chipset offerings for long-range high-bandwidth connectivity solutions. The successful adoption of the VS3000 product family by industry-leading customers also contributed in 2022 to the increase of our audio-video revenue in various applications. Last month, at ISE 2023 in Barcelona, more than 25 leading audio-video manufacturers showcased over 80 VS3000 based products. This was four times the number exhibited at ISE 2022. We also demonstrated new capabilities of the VS3000 chipset that can extend signals from multiple media sources, displays, and other accessories simultaneously. We already see traction by customers who intend to develop their next generation video conferencing products using our VS3000 chipset. These new capabilities of the VS3000 can also be applied in digital signage applications for transportation, retail, sports stadiums, and digital out-of-home markets. In 2022, we made progress in the development of a new low-cost USB 3.2 and USB 2.0 extension solution, the VS63-20, which is ideal for distribution of video conferencing peripherals as well as for industrial and medical applications. We expect first engineering samples to be shipped to select prospective customers towards the end of this year. Our ability to leverage our disruptive offerings across both our business segments is demonstrated by our VA6000 and VA7000 chipset families originally designed for automotive, which are now also targeting audio-video. In 2022, we grew the sales of our VA6000 for USB and power extension applications in the audio-video segment primarily for video conferencing applications in meeting rooms and classrooms; we expect it to also expand into industrial applications. We also continue to promote the VA7000 for audio-video applications. Meeting rooms are increasingly equipped with multiple displays and cameras. We believe the VA7000 is ideal for extending multiple cameras in video conferencing systems in industrial and medical imaging. These verticals need uncompressed, high-resolution, long-reach affordable connectivity solutions for video over flexible wiring with electromagnetic immunity. This new approach will enable us to drastically reduce the size and cost of the camera located at the table and/or on the wall and to achieve a 360-degree room view. Turning to automotive, the doubling of our automotive revenues in 2022 from 2021 was driven by sales of our VA6000 chipset, which provides symmetric connectivity and enabled data flow for infotainment and telematics. You can find our chips today in Mercedes-Benz S, C, and E-Class models, including the electric vehicle known as EV models. In parallel, the VA7000 MIPI A-PHY compliant chipsets provide a nonsymmetric high-speed connectivity solution for advanced driver assistance systems known as ADAS and for software-defined vehicles. At the end of 2022, we announced that the Japanese alliance JASPAR validated for its network of OEMs and Tier 1 the MIPI A-PHY specification. JASPAR's network includes Toyota, Nissan, Honda, Mazda, and DENSO. This came after our VA7000 chipsets passed their rigorous testing for electromagnetic compatibility known as EMC, which is required by automotive OEMs. This is an important milestone for the integration of these chipsets into safety-critical ADAS. Further demonstrating the momentum the VA7000 is gaining in Japan, we recently announced that Hosiden Corporation, a Japanese global provider of automotive electronic equipment components, completed the validation of its connectors and cables with the VA7000 chipsets. At this year’s CES, we showcased the benefits of our automotive high-speed connectivity product suite, alongside a comprehensive set of demonstrations from companies in the expanding ecosystem for the VA7000 chipset family. Innoviz, a LiDAR supplier, demoed its new 360-degree scanning product, which uses our VA7000. This LiDAR is planned for use in automotive and non-automotive markets. Valens Semiconductor's VA7000 chipset was the only alternative able to achieve the performance they were looking for to send a signal from the rotating part of the LiDAR through an air gap down to the processing part to cover the entire field of view. We are participating in several automotive OEMs for the use of our VA7000 chipsets, and we believe we will be announcing our first design wins this year. It typically takes a few more years following automotive design wins before generating initial revenues. ADAS is projected to grow towards at least $8 billion in the coming years driven by the growing number of sensors per car, which will require a greater number of high-speed connectivity chips like ours. We recently completed the development of the safety solution developed in partnership with Stoneridge, a leading designer and manufacturer of highly engineered electrical and electronic vehicle systems for the trucking industry. The next step is to promote the safety solution in the market and to start generating revenues. We continue to monitor the current turbulent geopolitical and economic environment. Macro changes such as the increase in inflation rates that trigger the rise of interest rates globally may affect our customers and their end customers. While we keep following the trends in the semiconductor industry that may influence our business, we remain focused on what is in our control: innovation, our go-to-market strategy, and execution.

Thank you, Gideon. I'll start with our fourth quarter and full year results and then provide our outlook for the first quarter and full year 2023. Starting with our fourth-quarter 2022 results. We achieved record quarterly revenues of $23.5 million, an increase of $2.7 million or 13.2% from the fourth quarter of 2021 and 1.4% from Q3 2022. The higher than anticipated revenue led by audio-video also contributed to an overall higher than expected gross profit and gross margin. Fourth-quarter 2022 gross profit was $16 million, up from $14.8 million in Q4 2021. Fourth-quarter 2022 gross margin exceeded our expectations and reached 68.3% compared to last year's 71.2%. Non-GAAP gross margin reached 69.2% compared to 71.5% in Q4 2021. The change compared to Q4 last year reflects a higher share of revenue coming from our automotive business, which incurs a lower gross margin than audio-video. Operating expenses in Q4 totaled $24.1 million compared to $23.4 million in Q4 2021. Research and development accounted for approximately two-thirds of the Q4 2022 OpEx coming in at $16.5 million and included expenses attributed to the successful completion of our automotive VA7000 family chipset tape-out as we prepare for mass production by our potential customers. SG&A expenses were $7.7 million, 9.8% lower than the $8.5 million in Q4 2021. In Q4 2022, we benefited from the renewal of the D&O insurance at a significantly reduced premium. Turning to net loss and adjusted EBITDA. Q4 2022 GAAP net loss was $7.3 million, better than the $8 million loss recorded in Q4 2021, and adjusted EBITDA in Q4 2022 was a loss of $4.6 million, better than the $7 million loss in Q4 2021. The substantially better than guided adjusted EBITDA loss in Q4 2022 was due to a combination of several factors. The strength of the U.S. dollar, which positively impacted expenses paid in Israeli Shekels, mainly for compensation to employees based in Israel. The higher than expected audio-video revenues, which positively impacted our gross profit and our laser focus on internal efficiency and savings applied in OpEx. GAAP loss per share for Q4 2022 was $0.07 compared to an $0.08 loss per share in Q4 2021. Non-GAAP loss per share in Q4 2022 was $0.03, better than the $0.06 loss per share in Q4 last year. Removing the stock-based compensation from the non-GAAP loss was the main reason for the delta between GAAP and non-GAAP loss per share. Looking at the full year 2022, our total revenues exceeded the high end of our guidance, increasing to a record of $90.7 million, up $20 million or 28.3% from 2021. Both business units, audio-video and automotive, reached this, which was driven by a higher number of chips sold and higher ASPs. Audio-video revenues reached a record $74.5 million, up a remarkable 18.7% from $62.8 million in 2021. In 2022, our customers’ demand was notably high, mainly for applications in the corporate, education, and medical verticals. In the education space, we are especially proud of the Florida Public School District award, which Gideon discussed in his prepared remarks. Automotive revenues reached a record $16.2 million, up 105% from $7.9 million in 2021, driven primarily by the expansion of our products into additional Mercedes-Benz car models. Gross profit in 2022 reached $63.4 million, up 25.3% from 2021. The higher gross profit was mainly driven by the increase in the number of chips sold and higher ASPs in 2022 compared to 2021. 2022 gross margin was 69.9% compared to 71.6% last year. 2022 non-GAAP gross margin was 70.7% compared to 71.8% last year. The difference in the gross margin was mainly due to our product mix as detailed earlier. Looking at our gross margins by business segments, audio-video carries high margins. 2022 gross margin in audio-video was 78.4%, up from 77.9% in 2021. Automotive gross margin increased to 30.7%, up from 21.2% in 2021, reflecting the margin improvement as volume ramps up. Full-year operating expenses were $91.8 million compared to $77.6 million in 2021. The year-over-year increase was primarily due to an increase of $11.3 million in research and development expenses as we invested in enhancing our product offering to address the business opportunities we see ahead in audio-video and automotive. This included investment in the development of the VS63-20, our new USB 3.2 extension product for audio-video. In automotive, we invested in a richer feature set of the VA7000 and in its preparation for mass production. We also started the development of the new VA7100 chipset family that will further enhance the capabilities of the VA7000. Another reason for the change in OpEx was the higher salary and related expenses recorded due to the highly competitive employment market we faced in 2022. These salary hikes were partially offset by the revaluation of the U.S. dollar compared to the New Israeli Shekel. SG&A expenses increased in 2022, mainly due to the expansion of the sales and marketing team to support the promotion of our new products. Furthermore, we recorded an increase in travel and exhibition expenses as restrictions were lifted and the global market began to recover. The finance expenses for the full year 2022 were $1.8 million compared to an income of $1.1 million for the full year 2021, a decrease of $2.9 million. The year-over-year change was primarily due to a 2022 $4.4 million of financial expenses related to forex that were offset by an interest income of $2.3 million. This compares to a 2021 forex income of $1.3 million and an interest income of $0.3 million. Moving to net loss and adjusted EBITDA. GAAP net loss for the full year 2022 was $27.7 million compared to $26.5 million in 2021. Adjusted EBITDA for the full year 2022 was a loss of $14.9 million, better than the $16.1 million in 2021. The improvement was mainly due to the revenue growth and higher gross profit, which was partially offset by the increase in 2022 OpEx. GAAP loss per share for 2022 was $0.28 compared to a loss per share for the year 2021 of $1.15 calculated as the net loss divided by 97.8 million shares and 33 million shares, respectively. Non-GAAP loss per share for 2022 was $0.17 compared to $0.47 last year. This improvement reflects a combination of improved non-GAAP loss in 2022 and the increase in the number of shares that I just mentioned. Turning to our balance sheet, we ended 2022 with a strong balance sheet. Cash, cash equivalents, and short-term deposits totaled $148.4 million, and we had no debt. This compares to $152.9 million at the end of Q3 2022. Our working capital as we ended the year was $163.7 million compared to $166.6 million at the end of Q3 2022. This difference of $2.9 million is mainly due to the loss incurred during Q4 2022. Our inventory as of December 31, 2022, was $23.8 million, an increase of $1.9 million from the end of Q3 2022. Approximately 60% of the inventory at the end of 2022 was attributed to finished goods. There are three primary reasons for this change. First, we live in an inflationary environment, and the value of new inventory is higher. Second, as we have discussed previously, to secure production capacity with vendors in the prior constrained supply environment and to also address our customer demand, we placed longer-term purchase orders. Goods from these purchase orders continue to arrive in the fourth quarter. Furthermore, approximately 40% of the inventory is attributed to work in process to streamline the production of goods. Third, this level of inventory is needed to meet the demand from our customers that we see ahead of us in 2023. Specifically, we anticipate significant growth in our automotive revenues from 2022 to 2023 and accordingly, most of the increase in our inventory is related to our automotive business. Given the demand environment in the first half of 2023 and considering production lead times, we expect inventories to remain at approximately this level in the first quarter of 2023. Now I would like to provide our guidance. For the first quarter of 2023, we expect revenues in the range of $23.6 million to $23.8 million. We expect some of our customers who have accrued inventory during the constrained supply environment to consume their inventory during the first half of the year. We expect Q1 gross margins to be in the range of 63% to 63.4%, reflecting the projected product mix to include a higher portion of revenues from our automotive business. Adjusted EBITDA loss in the first quarter is expected to be in the range of $6.5 million to $5.9 million. As of December 31, 2022, shares outstanding totaled 98.9 million excluding approximately 1 million shares that are subject to forfeiture. For the full year 2023, we expect revenues to range between $97 million and $100 million. We expect sales growth to be a little bit steeper in the second half of the year. As we anticipate substantially more automotive revenue in 2023 compared to 2022, up from 18% of our total annual revenues to a range of 27% to 29%, we expect gross margin to be in the range of 62% to 62.7%. The adjusted EBITDA is expected to be a loss in the range of $15.4 million to $13.6 million. We remain on track to reach adjusted EBITDA breakeven by the end of 2023, which means that in 2024, the company should reach cash flow profitability.

Thank you, Dror. We are proud of Valens Semiconductor's performance in the fourth quarter and full year 2022 as we once again achieved notable progress in both audio-video and automotive. Looking into 2023, the level of uncertainty is currently higher than what we have seen through the past couple of quarters, and we remain focused on those elements in our control. We're expecting to secure new design wins in audio-video and our initial wins for the VA7000 in automotive. Valens Semiconductor will continue to innovate, leverage our core technology across both of our business segments, and deliver new disruptive products to address market needs. We will continue to focus on the best opportunities, which we believe will drive sustainable growth and profitability for the company. Finally, before opening the call for questions, I want to thank all our stakeholders, including, of course, our employees for their ongoing commitment to the company's success. Operator, I would now like to open the call for questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. The first question is from Suji Desilva of Roth Capital. Please go ahead.

Hi Gideon, hi Dror. Congratulations on the strong performance in 2022 and the solid finish for the year. Looking ahead, you have lowered your guidance for gross margin in automotive, which I assume is due to an increasing mix. Will this significantly rise in the first quarter compared to the fourth quarter of 2022? I understand that for the full year, it is expected to increase to just below 62% gross margin. But will that trend begin in the first quarter? Additionally, what is the timeline for the VA7000 design announcement? Is it likely to be in the second half of 2022 or 2023, or could it potentially occur in the first half as well?

So let’s start with the — first of all, thank you Suji. Let’s start with the gross margin. You are absolutely correct. In the first quarter of 2023, we’re going to see higher revenue than Q4 2022 as we guided you. Indeed, given the fact that the automotive contribution revenue is going to be a bit higher, we are going to see that the gross margin is going to be a bit lower in the first quarter of 2023. Going forward, as we anticipate a portion of audio-video probably in the second half of the year, we expect this gross margin to be again—gave you the guidance for the gross margin for what was the question? The second half of 2023. Sure. So we continue to work and progress with the work that we are now ending with potential automotive customers. Obviously, the focus at the moment is to achieve design wins in 2023. As Gideon mentioned in his prepared remarks, we are already involved in several bids with automotive OEMs, and we believe that we'll be able to secure our first design wins this year. If it's going to be in the first half or the second half, I still do not know, but high probability, as we say today, that we're going to achieve these design wins in 2023.

I would like to add that while we don't have full control over the timing of design wins, our readiness for production, which is when revenues begin to come in, is independent of when the design win is secured. We are actively preparing for this. Although the timeline for the design win may vary, we are ensuring that we have a low level of flexibility in our readiness for RTP.

Okay. Great. Two more questions. First of all, on VA7000, will that give you an ASP uplift from the current VA6000 that you're ramping just to understand the contribution to revenue?

So it's an interesting question. As of today, if you remember, we mentioned that just as a reference, if you remember, we mentioned that today Mercedes-Benz car, we deploy about three chips per car, and the average revenue per car is a big nose to $25. And that's supposed to give you the order of magnitude of the ASP for the VA6000. When we look at the $7,000 VA7000 revenue contribution, I would say that per chip, the ASP is going to be a bit lower because if you remember our analysis, we assume an ASP between $4 to $5 per side, which means that the ASP per link or the revenue per link supposed to range between $8 to $10. I think the nice thing about the VA7000 is the difference in volume because while in the case of the VA6000, the content per car is something like 3 to 4 chips. In the case of the VA7000, we can reach easily to 10 and even up to 10 chips per car.

Thank you for the very detailed information. And last question for me and I'll go. Audio-video, it sounds like the nontraditional segments are coming up. Can they be a meaningful percent of the revenues in '23? I mean the medical, the industrial education? Thanks.

So again, thanks Suji. First, I think that what we announced we are seeing now, it's a nice mix of revenue coming from different verticals. This is what we see already during 2022, and especially towards the end of 2022, we started to see the new product, the newer product, the USB and power extender and of course, the VS3000 getting in new verticals. Just to give you a few examples. We just announced the Florida bid that we won. This is based on the VA6000, by the way, that was originally designed for automotive. And if we talk about the VS3000, so Crestron just announced that they have a list of dozens of different products powered with the VS3000. And by the way, just in the recent exhibition, the ISC 2023, we saw almost 80 different products powered with the VS3000, so it gives you the power of this device. Said that, there is a time gap between the design win or the selection of our customers in this device until we see the volume in the market, the ramp-up. There is this period time window where they design and qualify their product, and only then we start to see the volumes, the ramp up. So I believe that in towards the end of 2023, we will see a more significant contribution from the VS3000 over time. In the longer term, definitely VS3000 is going to take the lead from the first and second generation of our products.

The next question is from Vivek Arya of Bank of America. Please go ahead.

Hi, this is Vivek from Bank of America. Thanks for taking my questions. Just wanted to look more into the inventory corrections. I was curious if you can quantify the impact of the Q1 guide. And I can mostly on the audio-video side, but curious about the potential for the second half over your visibility into that?

Thanks, Vivek, it's good to talk again. Let's discuss the inventory correction. Towards the end of the year, it became apparent what the inventory levels were throughout the supply chain. We recognized that our customers are likely to consume this inventory and adjust their levels in the first quarter of 2023, possibly extending into the second quarter. This understanding is why we indicated that revenue growth in the first half might be more moderate compared to the stronger growth we expect in audio-video during the latter half of the year. Additionally, it's important to note that our inventory balance increased towards the end of 2022, influenced by several factors. We discussed aspects like the inflation environment, the need to place longer-term orders to secure capacity from our suppliers, and the necessity to increase inventory in preparation for higher demand, particularly in automotive for 2023. Moreover, in the current semiconductor industry, the main bottleneck is not on the foundry side, but rather in the fast rate manufacturing. To streamline production, we proactively purchased substrates in advance, which significantly contributed to the rise in our total inventory at the end of the year.

Great. And then quickly, just as a follow-up on just looking at OpEx in the near term, what kind of just some macro headwinds that I now understand you have to invest in future products. I'm just kind of curious how we should think about OpEx going through the year. Thanks.

So we mentioned that towards the end of 2023, we will reach adjusted EBITDA breakeven. This is expected due to an increase in our 2023 revenues compared to 2021. Even though we will report a lower gross margin because of a higher contribution from our automotive products, our gross profit will still be higher. From an operational expense perspective, in the first quarter, we anticipate being at the higher end of the expected OpEx for 2023 since we will be at various stages of development for three different products during that time. We are preparing the VA7000 for mass production, getting ready for the tape-out of the VS63-20 in audio-video, and have just started the next generation of our automotive product, the VA7100. All three projects are taking place in the first and second quarters. Over time, I believe our OpEx will stabilize, and combined with the revenue growth, this will help us reach the breakeven point we mentioned for the end of the year.

Thank you very much.

The next question is from Brian Dobson of Chardan Capital Markets. Please go ahead.

Hi, good morning. So the implementation of your technology for the school system is pretty exciting. Now that that's been won and approved by Florida, do you think there are other opportunities for similar contracts elsewhere in the United States?

Thank you very much for the question and for joining us this morning. We have just recently completed the first phase of development, and we are now moving to the next phase. We believe that the benefits this project will provide with the school students, teachers, and others trigger many additional similar projects.

Very good. Thanks. And then turning to automotive. You gave some very positive commentary about growth this year, particularly as you described gross margin enhancement in the automotive segment. As you're working toward, call it, EBITDA breakeven rather EBITDA breakeven run rate, what level of margin enhancement do you contemplate within your automotive segment? And where do you think that ultimately goes?

So as you know, we don't provide our guidance per segment. We just report the historical numbers per segment. I'll just tell you that in 2023, obviously, the automotive revenue is supposed to be based on the VA6000, similar to what we have seen in 2022. I would assume that more or less the gross margins that you can see in our reports. And by the way, our financial reports that are part of the annual report on Form 20-F that we just filed with the SEC includes the P&L by segment. So you can see the breakdown there. So I think more or less the gross margin that we reported for automotive that was approximately 30% in 2022. These are the same gross margins that we're going to see going forward. It's the same product. With respect to adjusted EBITDA, just to make sure that I understand your question, you asked specifically about automotive or in general with the company?

I asked about automotive, but in general with the company will be helpful as well.

Okay. So with respect to the company in general, I think as I referred to that point, I think the combination of the fact that we expect to see slightly steeper revenue growth in the second half of the year and the fact that in the second half of the year, the portion of the audio-video revenue is expected to be a bit higher as we expect customers, the audio-video customers to consume their inventory that we just discussed, I think that this should have a positive impact on the gross profit in the second half of 2023. And together with the fact that we will have balanced OpEx, this should contribute or help us get to the target of adjusted EBITDA towards the end of 2023. Specifically, with respect to automotive, it's in our control. We can decide to show profitability for automotive tomorrow morning if we decide to slow down the pace of investment in new product development. At this point in time, given the opportunities that we see ahead of us in automotive, it's our decision, it's our selection to continue and invest in order to enhance our product offering to automotive. We see lots of opportunities. And that's the reason why we think that at this point, despite the fact that we continue to spend money, the spending is higher than the gross profit in automotive. Over time, that's the right decision.

Again Brian, if I may add a bit just to reiterate what Dror said earlier, what we said also in the prepared remarks and everything, that taking all of that into account, we remain committed to reaching adjusted EBITDA towards the end of this year.

Excellent. Thank you. And it was great seeing our team at CES and looking at some of your technology first and particularly in the backup camera technology. Do you think you can give us a little bit of an update on what kind of market feedback you're seeing more?

Yes, I believe you are referring to the joint project we have with Stoneridge. First, I appreciate the recognition, and we share the same enthusiasm for this remarkable product. It represents a significant innovation that will play an important role in enhancing safety within the industry. As Gideon mentioned in his comments, we have recently finalized the joint development of the rearview camera solution. The next step primarily involves Stoneridge promoting this solution to their fleet management customers. They have broadened their go-to-market strategy and engaged with other companies, as evidenced by a recent announcement regarding additional collaborations aimed at boosting the solution's market presence. As previously noted, we anticipate that 2023 will be the initial year for introducing this solution, and we are fully confident that revenue growth from this outstanding device will commence in 2024.

There are no further questions at this time. Mr. Ben-Zvi, would you like to make your concluding statement?

Yes. Thank you. I would like to thank you all for joining us today for our Q4 and full year 2022 call and for your continued support and interest in Valens Semiconductor. Have a great rest of the day.

Thank you. This concludes the Valens Semiconductor Fourth Quarter 2022 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.