Good morning. My name is Jone, and I will be your conference operator today. At this time, I would like to welcome everyone to Valens Semiconductor's First Quarter 2024 Earnings Conference Call and Webcast. Opening remarks by Valens Semiconductor management will be followed by a question-and-answer session. I will now turn the call over to Lisa Fortuna, Investor Relations for Valens Semiconductor. Please go ahead.

Thank you, and welcome, everyone, to Valens Semiconductor's first quarter 2024 earnings call. With me today are Gideon Ben-Zvi, Chief Executive Officer; and Guy Nathanzon, 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 with the SEC on February 28, 2024, 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 attending the Oppenheimer 9th Annual Emerging Growth Conference and the Oppenheimer 25th Annual Israeli Conference in Tel Aviv, Israel. If you are interested in meeting with us, please e-mail us at [email protected]. With that, I'll now turn the call over to Gideon.

Hello, everyone, and thank you for joining Valens Semiconductor's first quarter 2024 earnings call. On our last call, we discussed the macroeconomic headwinds that would impact our business in 2024 and the first quarter operating environment was in line with our expectations. While we were pleased to report some upside relative to our previously reported guidance, we continued to be impacted by ongoing slow inventory digestion in the audio-video market and in the Automotive segment. Additionally, persistently high interest rates fueled by creeping inflation continued to impact our business landscape. Despite this environment, Valens Semiconductor remains determined to expand our collaborations and partnerships across the diverse verticals we serve, and we made good progress in this regard during this quarter. Later in the call, Guy will dive into the details. But for now, I want to cover Valens first quarter's performance at a high level. We are pleased to report that our revenue exceeded the top end of our guidance at $11.6 million. GAAP gross margin for the first quarter came in at 59% and adjusted EBITDA loss was $7.1 million, better than our guided range. Valens Semiconductor's robust balance sheet with $139.8 million of cash and cash equivalents allows us to continue investing in innovations and pursue long-term growth opportunities as we look to weather these headwinds. Now let me turn to our performance and the trends we are seeing in the markets we serve. Starting with audio-video; as we discussed last quarter, our ongoing investment in expanding our presence within multiple verticals of our audio-video market enables us to capitalize on positive long-term trends, thanks to the opportunities presented by the latest product additions to our portfolio, in particular, the VS6320 and the VA7000 chipsets. We estimate that these verticals, which include videoconferencing, industrial and machine vision could represent a total addressable market of approximately $1 billion per annum. We are currently in the process of outlining this opportunity in a modified strategic multiyear plan, which we expect to communicate to the market in the coming months. Within the videoconferencing vertical, a recent Frost & Sullivan report states that over a $3 billion global videoconferencing device market targeted by our customer is undergoing fundamental shifts. Despite current market conditions, video communication is becoming essential to the new office and conference room settings, creating greater market adoption. To this point, the CEO of Logitech, one of Valens customers recently stated that the potential in videoconferencing is enormous. He also said, if you look out 10 years, it makes perfect sense that all conference rooms will be video-enabled. We obviously agree with this market leader's assessment. This is consistent with what we have heard from additional customers who say the key growth drivers of this market are hybrid work and modernization of meeting rooms. There is growing demand for multi-camera rooms with higher attach rates of accessories and rapid innovation of AI in camera technology that enhances the meeting experience. Of course, many of these Pro-AV devices require high-performance extension; Valens solutions are ideal for delivering a seamless plug-and-play user experience for hybrid environments and multi-camera rooms. As the global videoconferencing device market continues to grow, so will the need for our robust connectivity solutions. An example of how we plan on capturing the value of the increasing global videoconferencing market is our VS6320, a first of its kind, USB 3.2 high-performance extension solution. The VS6320 is a game changer in the market, solving connectivity problems that exist for current technologies with a combination of multi-gig bandwidth and lower USB extension, enabling new use cases. We are very proud and have great expectations from this new welcomed member of our chipset family. We introduced VS6320 in Q4 2023, and since then, it has already been designed into over 30 products and the interest from additional customers continues to build for this chipset. We anticipate multiple announcements and product launches as early as the InfoComm International Trade Show this June. We are excited to see the initial backlog and expect sales to further ramp up during the second half of 2024. The VS6320 also has applications above and beyond videoconferencing, and we expect to see the chipset begin powering innovation in multiple markets. Moving on; as you are all no doubt aware, there is a rise in the use of AI across industries. For many applications, especially those requiring high-resolution, real-time video and data aggregated from multiple cameras, a high-performance connectivity solution is often required. Valens connectivity solutions have the potential to play a pivotal role in facilitating the adoption of artificial intelligence across multiple industries. An example of this is our collaboration with Taiwan-based AI image processing company, iCatch Technology, which aims to introduce a multi-camera solution based on their SoC and Valens VA7000 chipset for the videoconferencing and machine vision markets. With our VA7000 chipsets, we enable a robust, high bandwidth, zero latency connectivity infrastructure enabling real-time video processing and decision-making that is required for enhanced AI applications to date. iCatch also plans to launch an AI-enhanced multichannel surround view monitoring system for the automotive industry using our A-PHY based VA7000, which further underscores the versatility and impact of our high-performing technology across different sectors. Moving to Automotive; overall, our automotive business is stable. As you know, our first-generation VA6000 chipsets are using Mercedes-Benz Infotainment and telematics systems. 2023 was our first full year of selling into a broad range of Mercedes-Benz models, including their EV models. Between the fourth quarter of 2023 and the first quarter of 2024, we saw a reduction in revenues in our automotive business due to inventory digestion. With our asymmetric VA7000 MIPI A-PHY based chipsets, we continue to make encouraging progress in various evaluation processes. Last month, we announced a significant milestone in our collaboration with Sony Semiconductor Solution Corporation, as we jointly completed EMC and interoperability testing of a multi-vendor A-PHY link. Ideally, this will lead to a mature Sony A-PHY integrated image sensor that is compatible with our VA7000 deserializer chip. In addition to deepening the collaboration between Valens and Sony, one of the top three automotive sensor suppliers in the world, we announced that we are developing an 8-megapixel A-PHY camera module for the ADAS system that will prepare in the coming months. Earlier this year, we continued to see strong interest in our innovative technology from the automotive market. During the quarter, we invested in following up on new and interesting opportunities, which resulted from our demonstrations at the show. Nowhere was this more apparent than in our EMC shootout where our VA7000 A-PHY chipsets outperformed competing proprietary extension solutions. Our chipset was able to withstand around 20 times more noise than the competition. As the industry evolves and the OEMs push to integrate more sensors at higher resolutions with increased bandwidth requirements, the fragility of the links requires high-performance connectivity. Keeping a resilient link between a camera and an SoC is crucial for guaranteeing ADAS performance and passenger safety. This MIPI A-PHY ecosystem was further strengthened this quarter by our partnership with Black Sesame Technologies to enable the integration of A-PHY connectivity into their autonomous driving platform and later into the cross-domain computing platform, leveraging the VA7000 chipset. Black Sesame Technologies will offer and support the A-PHY connectivity standard for its automotive OEM and Tier 1 customers. According to the Co-Founder and President, Black Sesame decided to move forward with these implementations because of the significant interest they see for MIPI A-PHY connectivity, both within China and around the globe. Of course, we also continue to work closely with Intel Foundry Services on developing the next generation of our A-PHY compliant chipset for the automotive sector. We announced our strategic collaboration with IFS earlier in the first quarter and are proud to be partnering with one of the most important innovators in the industry. During the first quarter, we also announced our latest chipset innovation, the VA700R engineered to address critical visibility challenges faced by truckers on highways. This groundbreaking solution offers a combination of bandwidth and lane distances, enhancing both surround view and rearview visibility. Our VA700R chipsets can serve as the fundamental connectivity infrastructure empowering automotive OEMs and Tier 1 suppliers to forge future innovations. The VA700R sets the stage for a new era of advancements in the trucking industry to assist drivers in navigating challenging conditions, including significantly compromised visibility. We believe that our technological innovation, combined with our ability to identify opportunities within the industry could position us to take advantage of a total addressable market in this particular automotive segment, which could reach about $4.5 billion per annum by 2029. While the automotive market continues to suffer from slower decision-making processes in light of the macroeconomic environment, we remain confident in the ability of our technology to play a leading role in the in-vehicle connectivity solution market. With that, I will turn the call to Guy to discuss our financial performance in more detail.

Thank you, Gideon. I will start with our first quarter 2024 results and then provide our outlook for the second quarter. Starting with our first quarter 2024 results; we achieved quarterly revenue of $11.6 million, above the high end of the guidance range, compared to $23.9 million in the first quarter of 2023. First quarter 2024 gross profit was $6.8 million compared to $15.8 million in Q1 2023. First quarter 2024 gross margin was 59.0%, compared to 66.1% in Q1 2023. Non-GAAP gross margin reached 62.0% compared to 67.2% in Q1 2023. The change compared to Q1 of last year reflects lower total revenue, which resulted in lower fixed cost absorption, evaluation of certain cost of inventory, and the larger share of automotive revenue compared to audio-video, which has a much higher gross margin. Operating expenses in Q1 2024 totaled $18.1 million compared to $22.9 million in Q1 2023. Research and development expenses accounted for 56% of the Q1 2024 operating expenses coming in at $10.1 million compared to 61% of the Q1 2023 operating expenses, or $14.0 million in Q1 2023. SG&A expenses were $8.0 million compared to $8.9 million in Q1 2023. Turning to net loss and adjusted EBITDA. Q1 2024 GAAP net loss was $10.0 million versus a $5.4 million net loss recorded in Q1 2023, and adjusted EBITDA in Q1 2024 was a loss of $7.1 million compared to a loss of $2.9 million in Q1 2023. GAAP loss per share for Q1 2024 was $0.10 compared to $0.05 for Q1 2023. Non-GAAP loss per share in Q1 2024 was $0.06 compared to $0.03 in Q1 last year. The main difference between GAAP and non-GAAP loss per share was due to stock-based compensation and depreciation. Turning towards the balance sheet; we ended Q1 2024 with a strong balance sheet, with cash, cash equivalents, and short-term deposits totaling $139.8 million and no debt. This compares to $142.0 million at the end of Q4 2023. Our working capital at the end of the quarter was $153.3 million compared to $158.8 million at the end of Q4 2023. Our inventory as of March 31, 2024, was $12.5 million, down from $13.8 million at the end of Q4 2023. We continue to carefully manage our inventories and have effectively reduced them over the last four quarters. Now I would like to provide our guidance for the second quarter. When we reported our full year 2023 results at the end of February, we guided that second quarter revenue would be relatively flat compared to the first quarter. Due to slightly improved customer demand compared to the original forecast, we currently expect second quarter revenue to be in the range of $12.5 million to $13 million. We expect Q2 gross margins to be in the range of 52.0% to 52.5%. Adjusted EBITDA loss in the second quarter is expected to be in the range of negative $8.3 million to $8 million. Visibility continues to be limited, so we aren't providing guidance beyond the second quarter at this time. However, for the medium and longer term, we remain confident in our growth potential and we'll be ready to continue to execute our growth strategy with an even broader portfolio designed to penetrate untapped markets and verticals and enable the evolution of AI-based applications when the industry recovers. I'll now turn the call back to Gideon for his closing remarks before opening the call for Q&A.

Thank you, Guy. As we look at the balance of 2024, Valens Semiconductor will remain committed to executing our strategy and capitalizing on the promising opportunities within our target markets. Our innovative connectivity solutions and highly sophisticated chipsets position us to capture future opportunities that will continue to make a meaningful impact across a diverse set of growing industries. Our strong balance sheet provides us with the flexibility to continue to invest and innovate and importantly, to navigate dynamic market conditions. Before opening the call for questions, I want to express my gratitude to our exceptional team whose hard work and dedication are the driving force behind Valens Semiconductor. With that, I will now open the call for your questions.

The first question is from Suji Desilva of ROTH Capital.

My first question is about the AV market for conferencing. I'm curious about any early signs of traction that you might be seeing, particularly in this large market opportunity. Could you share any insights about key customer programs or how this might develop? I realize you have a multiyear plan ahead, but I would appreciate any ideas you can provide. My second question is about the automotive sector, specifically regarding how the market opportunity in China with Black Sesame differs from the dynamics of the global market.

Thank you, Suji. And that said, do you want to ask me the second question now or do you want me to first answer then you? Thank you for your questions and for joining our quarterly meeting. I'll begin with the first question regarding the AV market, where we have focused on high-end solutions for many years. Our two new products, the VS6320, a USB 3.0 extension, and the VA7000, have opened up significantly larger markets for us. In our last call, I mentioned our transition from being leaders in a niche market to becoming players in a much larger arena, and we are very excited about this shift. To elaborate, consider a conference room where everyone has a television in front of them. Typically, the camera is either on a laptop or the TV. When a new participant joins to speak with a small group, this setup is referred to as a huddle room. There are around 100 million of these rooms globally that need a solution. We have developed a unique offering that features a high technological barrier, one of the chips we are most proud to bring to market. As for the VA7000, it caters to high-end conference rooms, adapting to the trend of using multiple cameras. Currently, during a Teams call, those at home see smaller images on their screens while the in-room participants appear larger. Our goal is to democratize the conference room by employing artificial intelligence to focus on each individual participant, regardless of their presence. This is accomplished through a setup of multiple cameras, which is essential for achieving high efficiency without compression or latency, ensuring voice and visuals are synchronized. This represents our opportunity to shift from a satisfying niche market to a truly expansive one, and we are eager about this potential. That addresses the first question. Please let me know if it's okay to proceed to the second one. Thank you. Regarding the second question on the Chinese market and Black Sesame. We are all aware of the trade war, and that many Chinese companies try to achieve some level of independence; Black Sesame is one of those companies trying to have a solution for the ADAS. ADAS relies heavily on high-quality data as it requires the aggregation of a lot of information from different cameras, radars, and the fusion of that information simultaneously. Companies like Black Sesame recognize this dependency. I will be a little technical, but just for a moment; the higher the resolution, the more fragile the line is to distortions from electromagnetic interference, and the modern cars entering the market this year are starting from a higher baseline due to advanced systems. These companies are beginning with full resolution; they don't compromise. They need sensors that can detect potential accidents from a distance. The bandwidth level and resolution of cameras is crucial in recognizing critical details like a small foot of a child, which can be seen clearly with an 8-megapixel camera but may be missed with 4-megapixels. Similarly, when you look through fog, you may easily distinguish between red and green lights with a 12-bit per pixel camera, but struggle with an 8-bit per pixel camera. This is a lot of fragile data; the relationship between robustness and resolution is nonlinear. Those companies entering the field recognize the necessity of a very stable link, which is where we excel.

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

I guess just to lead off, I wanted to follow up on some of the important inroads you made with large educational groups in Florida? Has this opened up more of the education market to you? And have you received any kind of feedback from other, call it, large school districts?

Yes. First, nice to see you again, Brian, and thank you for your question. Education markets are important to us. This market has a lot of what’s called B2G (business-to-government) tendencies. While government decisions tend to take longer, when it rains, it pours. We are growing in this market; some things go faster or slower than we initially anticipated, but hybrid education is here to stay, leading to more installations. We believe we have the right partner for this market. The education market is important, and we see great potential with the VS6320. The difference between the camera involving the VS6320 and the VA6000 will be in the resolution and the ability to zoom and see sharply without pixelation, which enhances color depth. This is a significant move, and we believe it will boost our presence in this market considerably.

Very good. And then do you think you could provide us with some feedback you're hearing from key stakeholders in the trucking industry regarding your backup vision technology?

Thanks for this question. About the trucking industry, there are several points to note. Firstly, regarding our current technology, it's in testing, and the feedback from drivers has been positive. More importantly, our full solution for surround view represents a significant advancement that we believe will open up additional opportunities in the market, resulting in more revenue per vehicle. Currently, we are focused primarily on reverse cameras, but in the future, we aim to address all blind spots that truck drivers face when turning, especially in connecting the truck to the trailer. We believe we are advancing this market further. The trucking industry has a geological pace similar to that of the automotive industry.

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

Yes, I will. I would like to thank you all for joining us today for our Q1 2024 call and for your continued support and interest in Valens Semiconductor. I hope to see you in our next earnings call soon. Thank you very much, everyone.

Thank you. This concludes the Valens Semiconductor first quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.