Good morning. My name is Maya, and I will be your conference operator today. At this time, I would like to welcome everyone to Valen Semiconductors Second Quarter 2024 earnings conference call on webcast. [Operator Instructions]. I will now turn the call over to Lisa Fortuna, Investor Relations for Valens Semiconductor. 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 under investors.velens.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 20F, filed with the SEC on February 28, 2024 for 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 earning 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, video market, we continue to see growing interest in an adopting 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, video connectivity, for video conferencing, machine vision, industrial, medical and other verticals. In addition a recent acquisitions of Acronames, 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, to our second quarter of 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. Moving to Acroname acquisition,…

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 cheap 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 head count 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, coming in at $10 million compared to approximately 61% of the second quarter of 2023 operating expenses,…

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 highly sophisticated chipsets position us to achieve our goals and deliver value for our stakeholders. Our strong balance sheet provides us with 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 exceptional team whose hard work, talented dedication are the driving force behind Valens Semiconductor. With that, I will now open to call for your questions. Operator?

[Operator Instructions]. The first question is from Rick Schafer of Oppenheimer. Please go ahead.

Hi. This is [indiscernible] on the line for Rick. Congrats on the results. It looks like you guys delivered outside results to 2Q, and from the guide, it looks like 11% for the third quarter. So you mentioned that you guys started clearing inventory for the last five quarters. So how far are you guys from being inventory bottoming and considering the macro what are you considering in terms of the shape of recovery for the second half of the year, particularly in 4Q?

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

So in terms of the inventory, we definitely - in the inventory now, in our balance sheet, we still see on the trend of reducing the inventory and in 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 and also the development of a new product. How confident are you on reaching those milestones and to the extent that you can any color you could provide on this new development product?

Well, you know in our world, being confident is not an easy thing to deal with. We live in a world of a lot of uncertainty, but it seems that a lot of the good signs are here. And you know that will not provide the very long term forecast. But it seems like that we have the positive signs, but you know, other than that, I feel irresponsible to predict, to give projections.

Thank you. Maybe, if I could squeeze in one last one, the V6320, audio, video product, it seems like, you know, there's a lot of engagement, a lot of partnerships. You guys mentioned 50 or so products. What type of applications do you see first adoption? Are they in traditional conference rooms, huddle rooms. Are you seeing more interest in industrial applications? And when do you start to see these revenues start to contribute? I believe they ran the second half of this year. Is that correct?

Yes. Well, thank you for the question. And actually, I have a bit longer answer for this, and I'm happy you asked it, because I think my answer can put light on this product. You know, in Valens for a long time, and we were playing in the Pro AV world, and the V6320 opens for us first in the world of audio, video more markets, which are more lower end markets such as the huddle room and small and medium sized conference room, where people simply want to have a camera that covers more people, and they would want to use the full USB 3 extension and not to compromise in a USB 2 extension, which will reduce the resolution, reduce the bandwidth and the frame rate, or any other things. So this is the first application. It's the huddle room and make what the Logitech CEO, who said there are 100 million rooms in the world, that it's clear that in 10 years, all of them will have a solution. And the question is, what's the speed to get there? So this is when looking about the same vertical where we are in, which is the audio, video, moving from the very high end to medium end, not to the low end. We're not a consumer company, but definitely for the medium and less high end than we are, which is far, far larger markets. The second market which you ask about, the industrial it's a very, very big market that today we are aware of quite many millions, actually, just a little bit below 7 million cameras produced every year in this world, and a lot of them need extension. And the reason they are very sensitive to high resolution. It's a world where you need the…

[Operator Instructions]. 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 the time and for being with us. I want to thank our devoted employees, the talent and the contribution to be where we are and we see you next time in our next earnings call. Thank you very much for your attention, for your support, and we should continue and that's it. All the best and 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 you.