Valens Semiconductor Ltd.

Good morning. My name is Yoni, and I will be your conference operator today. At this time, I would like to welcome everyone to Valence Semiconductor's first quarter 2022 earnings conference call and webcast. All participant lines have been placed in a listen-only mode. Opening remarks by Valence Semiconductor management will be followed by a question and answer session. I will now turn the call over to Daphna Golden, Vice President of Investor Relations for Valence Semiconductor. Please go ahead.

Thank you and welcome everyone to Valence Semiconductor's first quarter 2022 earnings call. With me today are Gideon Bensvey, Chief Executive Officer, and Laura Heldenberg, Chief Financial Officer. Earlier today, we issued a press release that is available on the investor relations section of our website under investors.valence.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 March 2, 2022 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. We will be in Boston, New York, Tel Aviv, San Francisco, and London later this month and in June for investor conferences and meetings. If you're interested in meeting with us, please email me at investors at valence.com. With that, I will now turn the call over to Gideon.

Thanks, Daphna, and thank you everyone for joining our call today. Q1 was a record quarter for Valence Semiconductor and a very strong start to 2022. Revenue and profitability exceeded our guidance We are sales driven by continued solid demand for our core audio-video solutions as well as exceptionally strong demand for our emerging automotive products. We reported the company's highest ever quarterly revenues of $21.6 million, 62% higher from Q1 2021. I am proud to say that we continue to successfully meet customer demand even in today's challenging supply chain environment and we will continue to do so, taking proactive measures, working closely with our customers and suppliers. As a result of the better than anticipated start to the year and our outlook for the rest of 2022, we are raising our full year guidance. Most of this revenue increase is attributed to audio-video while also essentially doubling the automotive revenue from the full year 2021. Dor will elaborate on our guidance in his parts. Valence is well positioned to benefit from significant growth trends in both the automotive and audio-video markets. Starting with audio-video, the demand for our audio-video solutions continues to build across all geographic regions and is expanding into new applications within multiple verticals, corporate, education, government, industrial, and medical. Companies recognize the potential of our cost-effective, high-performance, and easy-to-install audio-video solutions that can be used in conference rooms, boardrooms, and training facilities in both hybrid and remote settings. We see a growing number of customers rolling out their next-generation products that embed a brand-newest member of the audio-video product, the VS-3000. As a reminder, the VS-3000 transfers uncompressed signals to deliver The most crisp picture possible in HDMI. It is versatile, supports full 4K HDMI video and can transfer audio video, 1 gigabit internet and USB formats all over a simple off-the-shelf single cable. Last quarter, I discussed the role we believe the Lens technology will play in what's called the next normal for hardware environments such as work, education, medical and others. In education, we are seeing more schools and universities upgrading their classroom infrastructure to enable more advanced in-classroom and remote learning. This trend is supported by the fact that the U.S. federal government recognizes the important role technology will play in keeping schools operating most effectively and enabling students ongoing studies even under the scenario that would have previously put U.S. Congress has allocated to date a budget of approximately $190 billion in elementary and secondary school emergency relief funding for kindergarten through 12th grade K-12 schools, which includes funds for educational technology, including hardware, software, and connectivity that enables remote and hybrid learning. We believe the use of advanced technology will expand to education systems worldwide, which is an opportunity for Valence to further enhance its business in the large education market segments. By implementing our solution, we enable schools to stay open, even in extreme scenarios such as severe weather and pandemic outbreaks. To that point, last month we announced that we joined the Logitech Collaboration Program to develop a solution using our technology and products in Logitech's USB peripheral suite to products for hybrid setups. Another interesting use case in education is a university in Japan. It was looking to build a modern classroom where students could easily see professors on video screens from anywhere in the large classroom. The university also required true 4K video quality as well as remote control of the in-class camera. Our audio-video solutions meet all these requirements while extending HDMI, USB, control, and power between PC and camera sources, projectors, and displays over a single off-the-shelf low-cost category cable. We also continue to see demand for our audio-video connectivity solutions from leading equipment vendors in the industrial and medical equipment markets. The medical equipment space is undergoing Significant transformation due to remote and hybrid healthcare, robotic surgery, and deep artificial intelligence AI diagnostics. These applications require uncompressed high-resolution video connectivity that is medical-grade and patient-isolated to ensure patient safety. For example, a US-based center for special surgery requires real-time uncompressed audio-video connectivity in surgery rooms. They recently completed updating the center's video signal transport infrastructure using Valence audio-video solution. Using the VS-3000, simple cabling was all that was needed to enable control and signal distribution, easy installation, and increased flexibility. Now, this medical center can retrieve videos from any of the surgical rooms in real time as well as imaging such as x-ray, on multiple displays. I am also encouraged to see that our VA7000 that was originally developed as a high-speed camera connectivity solution for automotive is also gaining traction in the medical industry. It perfectly fits medical equipment targeted for use in critical procedures that require long-reach, reliable, uncompressed, high-resolution video. and recently several prospective customers in medical imaging have begun evaluating the VA7000. While the sales cycle in medical is typically long, we are off to a very encouraging start and expect the medical market to become a meaningful business for Valence. We are proud of the role our technology will play in improving patient care. Turning to automotive. In the first quarter of 2022, we increased the number of OEMs, Tier 1s and Tier 2s looking to integrate our newest VA7000 chipset into the platform from the 25 reported previously to more than 32 dates. In fact, since December 2021, we have doubled the number of OEMs that are evaluating our MIPI H5 standard compliance VA7000 chips. To date, we have eight OEMs evaluating this solution. Furthermore, we have also been receiving positive feedback on our engineering samples from prospective customers and partners who have already started to evaluate the BA7000 samples. This is clear testament to the positive momentum and traction we see for the adoption of the A5 standard in the markets. We expect the next step with the OEMs requiring MIPI-A5 standard compliant high-speed connectivity technologies as part of their RFIs and RFQs. We believe we will begin to see these requests towards the beginning of 2023, resulting in new design wins by mid-year 2023, which will translate into mass production starting in 2025. In parallel, the larger A5 ecosystem also continue to grow. Earlier this week, we announced an important partnership with OmniVision, a leading Tier 2 supplier for in-vehicle camera sensors on a MIPI-A5 compliant sensor solution for Advanced Driver Assistance System applications . OmniVision will embed our VA7000-A5 compliant chipset in their Automotive Reference Design System camera modules. The initial camera module will also include an image sensor from OmniVision. As we speak, we are demonstrating this A5 reference design at OmniVision's booth at the AutoSense Detroit exhibition. Also at AutoSense, we are leading a session on turning sensor fusion into reality for ADAS. It is clear that the fusion of data from various types of sensors and the integration of data in the compute unit will play an essential role in reliable ASI systems and autonomous driving. These concepts of sensor fusion will require a reliable high bandwidth video connectivity solution that can aggregate the data from the biosensor to the compute unit. We believe that our ASI compliant solution will play a vital role in the realization of these important trends. We are also advancing with our joint project with Stone Ridge and continue to expect ramping revenue from this project in 2023 and beyond. As a reminder, Stone Ridge is incorporating our VA6000 chipset into a connectivity solution to enhance vision and safety systems in tractor trailers to address critical safety issues in the trucking industry. The trucking industry TAM is quite extensive. with more than 2 million new heavy trucks sold each year globally in addition to a significant aftermarket opportunity. With our automotive product portfolio currently comprised of the non-symmetric VA7000 chipset and the symmetric VA6000 chipset families, Valence is one-stop shop for the in-vehicle wired high-speed connectivity required by OEMs. Why is this important? For today's infotainment and telematics, data flows in cars mostly over symmetric links. In parallel, to enable tomorrow's automotive applications such as ADAS and autonomous vehicles, manufacturers require video connectivity over non-symmetric links. The automotive market is looking to deploy standard-based products for high-speed video connectivity for ADAS and autonomous vehicle applications rather than today's legacy solutions which are proprietary and require dependency on specific vendors. All told, our end-to-end symmetric and non-symmetric offerings and primarily the NIPI A5000 compliant chipset, the VA7000 provide huge advantage to automotive OEMs looking for comprehensive sets of solutions addressing their high bandwidth connectivity needs. I now turn it over to George Heldenberg, our CFO, to review our Q1 2022 financial results and provide our financial outlook.