Good morning. My name is Maya, and I will be your conference operator today. At this time, I would like to welcome everyone to Valens Semiconductor's second quarter 2024 earnings conference call on webcast. Please go ahead.

Thank you and welcome everyone to the Valens Semiconductor second 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. 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 20F, 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. With that, I'll now turn the call over to Gideon.

Hello, everyone, and thank you for joining Valens Semiconductor's second quarter 2024 earnings call. This quarter our team made solid progress executing against our long-term strategy and capitalizing on growing market demand for our high-performance connectivity solutions. This resulted in revenue exceeding our guidance, increasing our confidence in the positive trends we are seeing across the diverse verticals we serve. In the audio and video market, we continue to see growing interest in the adoption of our latest USB 3 extension technology, the VS6320 chipsets. Reflecting this momentum, we entered exciting new partnerships and collaborations in recent months, strengthening our go-to-market strategy. We believe we are poised to capitalize on the $1 billion annual total addressable market in audio and video connectivity for video conferencing, machine vision, industrial, medical, and other verticals. In addition, the recent acquisition of Acroname, the first M&A transaction of Valens Semiconductor, elevates our presence in these verticals. All of these developments occur despite continuous challenges, including slow inventory digestion in the audio video segment. Despite these short-term challenges, our mid and long-term opportunities remain promising. Moving on to a quick overview of our second quarter financial performance, we are pleased to report that organic revenues exceeded the top end of our guidance at $13.2 million. Acroname contributed an additional $0.4 million, which increased total revenue to $13.6 million. Acroname was consolidated from May 31; its contribution this quarter represents just one month of revenue. GAAP gross margin of the second quarter came in at 61.4%, and adjusted EBITDA loss was $5.2 million, both beating our guided ranges. We have a very strong balance sheet with $130.6 million of cash and cash equivalents that allows us to continue investing in innovations and pursuing long-term growth opportunities. Regarding the Acroname acquisition, I would like to give you more detail about why we're excited about this recent acquisition. Acroname is based in Boulder, Colorado, and has around 20 employees, most of whom are talented engineers. Acroname is pioneering advanced automation and control technologies for applications in industrial robotic control systems and audio video conference rooms. Their products and solutions will enable us to expand our position in the industrial and audio video market, being a leading supplier of high programmable USB hubs, switches, and test automation systems for industrial applications. This first M&A transaction, although modest in size, marks a significant milestone in our strategy to support non-organic growth through synergistic acquisitions that will enhance value for our customers and shareholders. Importantly, our strong balance sheet provides us with the flexibility to move quickly when opportunities arise. Going forward, we expect this highly selective acquisition strategy to complement our organic growth initiatives. Now, let me discuss our performance and the trends we are seeing in the markets we serve, starting with professional audio video, which includes applications such as entertainment, video conferencing, education, and digital signage. Since its introduction late last year, we are proud to have over 50 customers developing products based on the VS6320 chipset, with a wide variety of products already launched. The public excitement for the chipset validates the VS6320's groundbreaking technology and demonstrates the high demand for reliable, streamlined, and affordable connectivity. The industry's eagerness for this chipset was most apparent at InfoComm International, the largest professional audio video trade show in North America, which took place in mid-June. At the show, many leading manufacturers announced the launch of products, while others demonstrated the VS6320 embedded in their offerings, which include USB extenders, PTZ cameras, video bars, wall plates, docking stations, room appliance controllers, and USB hub switches. All across the show floor, people were praising the new capabilities of the VS6320 chipset. We are pleased to report that we reached mass production of the VS6320 chipset in July and expect to start generating revenues in the second half of 2024 before ramping up further in 2025. There is growing adoption of video conferencing systems driven by hybrid work and education environments, as well as necessary improvements to the user experience. Despite current market conditions, these positive trends are expected to support mid and long-term demand for our chipsets. In addition, during the second quarter, we continued to expand our partnerships with leading providers to accelerate new product introductions. One such example is our partnership with Taiwan-based Good Way Technology, one of the world's leading PC peripheral design and manufacturing companies. They have leveraged our VS6320 in combination with Synaptics Display Link Technology to offer the video conferencing market a simplified, flexible, and cost-effective solution, opening the door for the integration of documentation into reasonably priced meeting rooms. As you can see, video conferencing continues to be a major focus for us, and we expect it to be a driving factor in the recovery of the entire Pro AV market. We are encouraged by the investments that leading tech companies like Microsoft and Zoom are making. These innovative solutions will improve the user experience through certification processes for video conferencing systems, leading to seamless and unified experiences in hybrid meetings. We expect that these certifications will drive the adoption of better technologies, which is where we have a significant advantage. Moving on to the machine vision and industrial verticals, Valens has engaged the industrial marketing application, collecting industrial PCs and Remote Touch displays, extending HDMI and USB-enabled remote operation of industrial machines. With the launch of our VS6320 and VA7000 chipsets, we are now entering a much larger market, machine vision. These new chipsets are targeting two main segments in the machine vision world: the IPC-based and the embedded vision segments, respectively. The IPC-based segment is dominated by two standard technologies: GigE Vision and USB3 Vision. Until recently, USB3 Vision offered significantly higher bandwidth but limited cable lengths. Now, with the Valens USB3 extension solution, USB3 Vision can support the same 100-meter distance as GigE, alongside much-needed higher bandwidth. Our new solution enables high-resolution machine vision systems such as visual inspection and automated warehouse operations. The embedded vision segment typically leverages proprietary camera extension technologies. Valens' V7000 CSI2 extension solution brings significant benefits; it is based on the MIPI A-PHY standard, enabling higher bandwidth extension over long and simpler cables, and it is 20 times more robust to electromagnetic interference than competing technologies. Valens is increasing its investment in the industrial machine vision vertical, expanding our partnerships across the ecosystem to enable faster production through our technology. We believe that the fruits of this effort will be on display during the Vision Show in Stuttgart, Germany, on October 8th. Before discussing automotive, I would like to briefly address the current challenges in the audio video markets. We are still experiencing a significant reduction in our audio video revenue compared to last year. We believe this is related to general weakness in the macro economy and to customers continuing to hold high levels of inventory, which dampens new order, replacement, and upgrade activity. We remain optimistic about the audio and video market in the medium and longer term. We believe we are in a cycle, and that our legacy products will get back to the levels of revenue we used to see in the past. In addition, the VS6320-based products are set to become significant new revenue growth drivers, as well as in the new industry machine vision vertical. Moving to automotive, our automotive business is stable overall. As a reminder, our first-generation VA6000 chipsets are used in Mercedes-Benz infotainment and telematics systems. A big part of our focus remains on our second-generation chipsets, the VA7000, which complies with the MIPI A-PHY standards. We are progressing in several evaluation processes with global automotive OEMs on this chipset, and customer feedback has been encouraging. We continue to work with companies across the ecosystem to design and develop products based around this technology. One example of the growth in the A-PHY ecosystem came last month when Continental, one of the largest Tier 1 automotive suppliers in the world, introduced the A-PHY standard into their ADAS camera build. They announced that they have upgraded their SSC-300 camera, which now features a link speed of up to 8 gigabits, enabling resolution beyond 8 megapixels. They said, and I quote, 'the MIPI A-PHY standard ensures the lowest error rate and enhanced EMC robustness, making our cameras resistant to external interference and reliable in various conditions.' Continental is the latest in a long list of companies joining the A-PHY ecosystem and recognizing the many technological benefits this technology offers the automotive industry. We are confident that our innovative technology will position us to take advantage of an enormous opportunity in this automotive segment, which may exceed $4.5 million annually by 2029. We're optimistic about our technology and its potential to meet the wave of connectivity solutions. Before I turn over to Guy, I would like to briefly discuss a trend that crosses traditional industry boundaries: the growth of AI. Much of the AI system architecture we know and use today is cloud-based, including popular large language models like ChatGPT. However, there is another kind of AI system architecture called Edge AI, and it is finding new avenues for deployment in applications that require real-time operations, where the AI processor is separated from the data sensor input. The AI processor must leverage a high-performance connectivity solution, specifically one that is uncompressed and error-free, to make accurate decisions. Valens' cost-effective and high-performance distribution technology plays an instrumental role in enabling this breakthrough technology in the automotive, machine vision, and video conferencing industries. With that, I will turn the call to Guy to discuss our financial performance in more detail.

Thank you, Gideon. I'll start with our second quarter 2024 results, and then provide our outlook for the third quarter. We achieved quarterly revenues of $13.6 million, exceeding our guidance of between $12.5 million to $13 million. Our revenue, excluding Acroname, was $13.2 million, above the high range of the guidance. This compares to revenues of $24.2 million in the second quarter of 2023. The reduction is related to the inventory digestion cycle of our customers, as explained by Gideon earlier. Audio video contributed $8.1 million, or approximately 60% of total revenues, and automotive contributed $5.5 million, or approximately 40% of total revenues this quarter. This compares to audio video revenues of $15.5 million and automotive revenues of $8.7 million, representing 64% and 36% of total revenues, respectively, in the second quarter of 2023. Second quarter 2024 gross profit was $8.3 million compared to $14.9 million in the second quarter of 2023. Second quarter 2024 gross margin was 61.4% compared to 61.8% in the second quarter of 2023. On a segment basis, our audio video gross margin was 75.4%, and the automotive gross margin was 40.9% compared to 75.3% and 37.8%, respectively, in the second quarter of 2023. The increase in automotive gross margin was related to cost improvements. Non-GAAP gross margin was 64.5% compared to 63.1% in the second quarter of 2023. Operating expenses in the second quarter of 2024 totaled $17.8 million compared to $20.1 million in the second quarter of 2023, mainly due to a reduced headcount as part of the efficiency plan that was implemented in the second half of 2023. Research and Development expenses accounted for approximately 56% of the second quarter of 2024 operating expenses, totaling $10 million compared to approximately 61% of the second quarter of 2023 operating expenses, which was $12.2 million. SG&A expenses were $7.8 million compared to $8 million in the second quarter of 2023. The second quarter of 2024 GAAP net loss was $8.9 million versus a net loss of $4.6 million recorded in the second quarter of 2023, and adjusted EBITDA in the second quarter of 2024 was a loss of $5.2 million compared to a loss of $0.8 million in the second quarter of 2023. GAAP loss per share for the second quarter of 2024 was $0.08 compared to GAAP loss per share of $0.05 for the second quarter of 2023. Non-GAAP loss per share in the second quarter of 2024 was $0.04 compared to $0.00 in the second quarter of 2023. The main difference between GAAP and non-GAAP loss per share was due to stock-based compensation, depreciation, and amortization. We ended the second quarter of 2024 with a strong balance sheet, with cash, cash equivalents, and short-term deposits totaling $130.6 million and no debt. This compares to $139.8 million at the end of the first quarter of 2024. The reduction is related to ongoing operational expenses and one-time expenses of $7.8 million associated with the acquisition. Our working capital at the end of the quarter was $142.3 million compared to $153.3 million at the end of the first quarter of 2024. Our inventory as of June 30, 2024, was $14.1 million, of which $2.5 million was from Acroname. Excluding this amount, inventory was $11.6 million, down versus $12.5 million at the end of the first quarter of 2024. We continue to carefully manage our inventory and effectively reduce them over the last five quarters. Now I would like to provide our guidance for the third quarter. We expect third quarter revenues to be in the range of $14.7 million to $15.4 million, of which $1.2 million to $1.4 million are expected to come from Acroname. We expect gross margin to be in the range of 52% to 53%, and we expect adjusted EBITDA loss in the third quarter to be in the range of negative $6.8 million to $6.3 million. Turning to the acquisition of Acroname, as Gideon mentioned, this was our first acquisition. The purchase price was $7.8 million in cash, and an additional $1.3 million was transferred to Acroname in consideration for the amount Acroname held in cash at closing. Further, the company will be obligated to pay the sellers earn-out payments of up to $7.2 million depending on the achievement of certain revenue, EBITDA, and cash flow targets in 2024 and 2025, along with the development of a certain product by June 2026. Based on financials provided to the company, Acroname's revenue for the first six months of 2024 was $3.3 million. However, since the closing was on May 31, 2024, we consolidated revenue of $0.4 million in our financial results during the second quarter. I'll now turn the call back to Gideon for his closing remarks before opening the call for Q&A.

Thank you, Guy. Today, we demonstrated how Valens' new offerings not only expand our presence in existing markets but also enable us to enter AI-driven markets, addressing the critical connectivity needs in machine vision. The synergies of our solutions across the various markets we serve continue to prove their value. As we look to the second half of 2024, Valens Semiconductor remains committed to executing our long-term growth strategy and capitalizing on the promising opportunities within our target markets. Our innovative, standard-setting, high-speed connectivity solutions and sophisticated chipsets position us to achieve our goals and deliver value for our stakeholders. Our strong balance sheet provides us with the flexibility to continue to invest, acquire, and innovate, and importantly, to navigate dynamic market conditions. We're also excited to announce that we are planning to host an Investor Day in New York this November; stay tuned for details. Before opening the call for questions, I want to express my gratitude for our exceptional team whose hard work and talent are the driving force behind Valens Semiconductor. With that, I will now open the call for your questions.

The first question is from Rick Schafer of Oppenheimer. Please go ahead.

Hi. This is someone calling for Rick. Congratulations on the results. It appears you achieved solid results for the second quarter, and based on the guidance, it looks like an 11% increase is expected for the third quarter. You mentioned that you've been working on clearing inventory over the past five quarters. How close are you to having your inventory reach a bottom? Given the current economic landscape, what do you expect in terms of the recovery shape for the second half of the year, especially in the fourth quarter?

Before I answer, I want to apologize for the technical problems we all experienced today with the provider of the conference call. I sincerely apologize and just wanted to mention it. Guy will take the answer for this question, so please, Guy.

In terms of the inventory, we are definitely seeing a reduction in the inventory on our balance sheet. We still see a trend of reducing the inventory consumption in line with our long-term goals, achieving a reasonable number of inventory days.

Okay, great. Thank you. As for my second question, it's on Acroname. It looks like part of the deal requires reaching certain key milestones and metrics, as well as the development of a new product. How confident are you about reaching those milestones? And to the extent that you can, any color you could provide on this new product development?

In our world, being confident is not an easy thing to deal with. We live in a world with a lot of uncertainty, but it seems that many good signs are present. I cannot provide very long-term forecasts, but there are positive signs. I feel it's irresponsible to predict broad projections.

Thank you. Maybe, if I could squeeze in one last question. The VS6320 audio video product seems to have a lot of engagement and partnerships. You mentioned 50 or so products. What types of applications do you see for first adoption? Are they in traditional conference rooms, huddle rooms, or are you seeing more interest in industrial applications? And when do you expect to see these revenues start to contribute? I believe you mentioned they would begin in the second half of this year. Is that correct?

Yes, thank you for the question. I actually have a longer answer, and I'm glad you asked because I think my response can shed more light on this product. At Valens, we've long played in the Pro AV world, and the VS6320 opens up first to the world of audio and video in lower-end markets, such as huddle rooms and small to medium-sized conference rooms. People simply want to have a camera that covers more participants, and they want to utilize the full USB 3 extension without compromising on USB 2 extensions, which reduce resolution, bandwidth, and frame rate. This is the first application. It's in huddle rooms, as the Logitech CEO noted, there are 100 million rooms in the world, and it's clear that in 10 years, all of them will have a solution. The question is, what speed will we get there? As we look into the same vertical, we are moving from the very high end to the medium and less high end which represent far larger markets. The second market, which you asked about, is industrial—it's a very large market with nearly 7 million cameras being produced annually in this world, many of which require extension. The need for high resolution in this market is critical because visual inspection, machine response to changes, and color sensitivity depend on bandwidth. High bandwidth is essential due to these demands. Furthermore, the medical market is another area we are exploring where the same parameters: frame rate, resolution, and bits per pixel sensitivity are very significant. Regarding when we expect orders and deliveries, we are fortunate to say we are ramping up nicely in the second half, despite the semiconductor market's traditional slowness. We're seeing growth in orders, and we are happy with the ramp-up for the VS6320, which we have never experienced before.

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

Sure. First, I want to thank everyone for their time and for being with us. I want to thank our devoted employees for their talent and contributions that have brought us to where we are today. We look forward to seeing you in our next earnings call. Thank you very much for your attention and support, and best wishes. Have a good day.

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