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 First Quarter 2022 Earnings Conference Call and Webcast. All participant lines have been placed in a listen-only mode. Opening remarks by Valens Semiconductor management will be followed by a question-and-answer session. I will now turn the call over to Daphna Golden, Vice President of Industrial Relations for Valens Semiconductor. Please go ahead.

Thank you, and welcome everyone to Valens Semiconductor's first quarter 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 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@valens.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 Valens Semiconductor and a very strong start to 2022. Revenue and profitability exceeded our guidance with 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 if you continue to successfully meet customer demand even in today's challenging supply chain environment, and 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 these revenue increase attributed to Audio-Video, while also essentially doubling the automotive revenue from the full year 2021. Dror will elaborate in our guidance in his remarks. Valens 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 embeded the newest member of the Audio-Video products, the VS3000. As a reminder, the VS3000 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, one gigabyte…

Thank you, Gideon. I'll start with our first quarter 2022 results and then provide our outlook for the second quarter and updated full year 2022 guidance. Beginning with our first quarter 2022 results, we topped our revenue guidance, achieving record total revenues of $21.6 million, an increase of 61.8% from the first quarter of 2021. Q1 2022 gross profit grew to a record of $15.4 million from $9.5 million in Q1 2021 an increase of 62%. First quarter 2022 gross margin was 71.4% similar to last year 71.3%. Non-GAAP gross margin increased to 72.1%, up from 71.8% in Q1 2021. The better than anticipated gross margins were driven by a favorable product mix in audio- video, as well as the increase in automotive gross margins from prior quarters as this business begins to scale. In addition, in Q1, we enjoyed the benefits from sales based on today’s higher ASPs, while a portion of the cost of goods was still based on previous lower pricing. Operating expenses in Q1, 2022 were $22.6 million, up from $15.7 million in Q1 last year. The $6.9 million increase was mainly due to an additional $3.7 million in research and development expenses, representing 54% of the total year-over-year increase in OpEx. This demonstrates our continued investment in expanding our product offerings to address the business opportunities ahead of us. Sales and marketing expenses increased $1.1 million dollars, due to higher levels of promotion of our new audio-video an automotive products, and G&A expenses were up by $2.1 million, primarily due to public company expenses such as costs related to D&O insurance and professional services. We also exceeded our adjusted EBITDA guidance, with our first quarter 2022 adjusted EBITDA loss coming in at $4.1 million, compared to the loss of $4.3 million in the first quarter…

Thank you, Dror. Our continued success demonstrates once again why we believe Valens is well positioned to create value for our stakeholders. Valens operates in two large and fast growing addressable markets, automotive and audio-video. Second Valens enjoys a first mover advantage for its wired high-speed connectivity solutions over simple and low cost infrastructure by setting industry standards. We first did it audio-video market having established our leadership position in audio- video and we are now replicating the success in the automotive market. Third, our business model offers compelling financial metrics as we started semi-conductor company we're driving environmentally responsible growth. I would also like to take this opportunity to thank our incredible and talented team of employees around the world for their exceptional education and execution. They made a very impressive start of 2022 possible and I'm confident that they will drive Valens continued success. Operator, I would now like to open the call for questions. [Operator Instructions] The first question is from Atif Malik of Citi. Please go ahead.

Hi, thank you for taking my questions and good job in raising the full view guidance. And I have two questions for Dror. Dror that $2 million the $3 million increase incrementally for the annual guidance. Can you break that out between audio-video, and autos? Great. And then you commented that the gross margins on the auto side are benefiting from higher ASPs and I want understand what is the assumption you're making on the pricing for the full year as you continue to hear foundries raising pricing even into next year, so what is the - how you thinking about - in the full year guidance? Okay, so it's a question that involves both the price adjustments or the price increase that we see from our supply chain vendors, and the price adjustment that we made shortly after to our customers. So, you know, let's start with the supply chain of price adjustment or price increase. I would say that unlike what we have seen last year in 2021, and primarily in Q-to-Q in the third quarter of 2021. Today, we see more kind of an end of price increases from our supply chain vendors. It's not in the same order of magnitude that we've seen last year. If you remember, starting from this year, January 1, this year, we implemented the price adjustments to the price increase to our customers to compensate on what we've seen with respect to our supply chain. And part of this price increase also referred to the automotive customers. I must admit that in the current circumstances, we don't believe that the price will go down in the foreseeable future. It doesn't seem like that. So, I believe that we reach to some kind of status quo that I believe that will be give us at least through the end of 2022.

Yes, and one last one to Gideon. Gideon, some of your auto peers have talked about an inflection in second half in auto per ADAS as doing video or call comments. Understand you guys have you have an incubation time for Europe for your chip. How are you looking with auto market? Do you also see some type of inflection happening in second half into next year? Well, can you please elaborate the question? I'm not sure, I did understand the question. Yes, I'm just trying to understand the trajectory of your auto sales. Are you seeing second half meaningfully higher for auto sales over first pass into next year? Actually, yes. We -- let me spell it perfect for the questions, I think it's very important to elaborate here, we see the deep lensed solution for this market is something that doesn't matter whether it's in video or others that they will need to transfer data from sensors to the ECU. So, whatever the ecosystem you mentioned, will be the one who wins, we believe that most of them would need us to complete the solution. Now, there is in our -- as you know, in our market, the times are not fast, it's an automotive, it's slower than the Audio- Video. And the time takes between the design wins, to when you see the, not the big numbers, the ramp up is longer. So, if you're looking at whether in the second half of 2023, we will see ramp up from those numbers, then the answer from the [indiscernible] the answer is no. If looking for whether we are going to continue with the rough with existing, we think the answer is, yes. I hope, I answered you. Got it. Thank you. Maybe just to add to what…

Yes. Thank you.