Q1 2026 Valens Semiconductor Ltd Earnings Call

May 13, 2026

Speaker #1: Teleconference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Mikey Benari, Investor Relations.

Speaker #1: You may begin.

Speaker #2: Thank you and welcome, everyone, to Valens Semiconductor's first quarter 2026 earnings call. With me today are Yoram Salinger, Chief Executive Officer and Guy Nathanzon, Chief Financial Officer.

Speaker #2: 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.

Speaker #2: These statements are subject to the Safe Harbor language in today's press release. Please refer to our annual report on Form 20Fs filed with the SEC on February 25, 2026, for a discussion of the factors that could cause actual results to defer materially from those expressed or implied.

Speaker #2: 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 reconciliation of these metrics within our earnings release.

Operator 3: Thank you for standing by, and welcome to the Valens Semiconductor Q1 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Thank you. I'd now like to turn the call over to Michal Ben Ari, Investor Relations. You may begin.

Operator: Thank you for standing by, and welcome to the Valens Semiconductor Q1 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you Thank you. I'd now like to turn the call over to Michal Ben Ari, Investor Relations. You may begin.

Speaker #2: With that, I will now turn the call over to Yoram.

Speaker #2: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Speaker #3: Thank you, Mikey. Hello, everyone, and thank you for joining us. During our last call, we discussed how microeconomic conditions and slow pace of technology adoption could affect our business in 2026.

Speaker #2: If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Mikey Benari, Investor Relations.

Speaker #3: In our first quarter was in line with our expectations. Nevertheless, we are pleased to report that our revenues exceeded the top end of our guidance at 16.9 million dollars.

Speaker #2: You may begin. Thank you and welcome, everyone, to Valens Semiconductor's first quarter 2026 earnings call. With me today are Yoram Zinger, Chief Executive Officer and Guy Nathanzon, Chief Financial Officer.

Michal Ben Ari: Thank you, and welcome everyone to Valens Semiconductor's Q1 2026 earnings call. With me today are Yoram Salinger, 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 earning 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 25 February 2026 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.

Speaker #3: GAAP gross margin for the first quarter came at 62.2%, well above the guidance. Our adjusted EBITDA was a loss of 5.5 million dollars, a smaller than anticipated loss compared to our guidance.

Speaker #3: I'd like to highlight some of our key achievements in Q1 and I'll start with audio-video. We continue to see strong adoption of one of our newest chips, the BS3000, as the industry trends towards high-resolution video.

Speaker #2: 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 25, 2026, for a discussion of the factors that could cause actual results to defer materially from those expressed or implied.

Speaker #3: As a reminder, this chip is the only one on the market that can extend uncompressed HDMI 2.0 or over widely used category cables. In Q1, we saw additional products hit the market based on this chip.

Michal Ben Ari: 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 reconciliation of these metrics within our earnings release. With that, I will now turn the call over to Yoram.

Speaker #3: One exciting example came from a leading AV manufacturer, Extron. Which released to the market new metric switches built for premium collaboration spaces. What they're calling the DTP3 crosspoint 42 series.

Speaker #2: With that, I will now turn the call over to Yoram.

Yoram Salinger: Thank you, Michal Ben Ari. Hello, everyone, and thank you for joining us. During our last call, we discussed how macroeconomic conditions and slow pace of technology adoption could affect our business in 2026. Our Q1 was in line with our expectations. Nevertheless, we are pleased to report that our revenues exceeded the top end of our guidance at $16.9 million. GAAP gross margin for the Q1 came at 62.2%, well above the guidance. Our adjusted EBITDA was a loss of $5.5 million, a smaller than anticipated loss compared to our guidance. I'd like to highlight some of our key achievements in Q1. I'll start with audio/video. We continue to see strong adoption of one of our newest chips, the VS3000, as the industry trends towards high-resolution video.

Speaker #3: Our chip is a cornerstone technology underpinning this product, supporting uncompressed video audio and controls up to 330 feet. This is great news for Valens as the BS3000 is the most advanced HD-based chip we offer and is a pillar of the growth opportunity in our core audio-video market.

Speaker #3: And our first quarter was in line with our expectations. Nevertheless, we are pleased to report that our revenues exceeded the top end of our guidance at $16.9 million.

Speaker #3: GAAP gross margin for the first quarter came at $62.2%, well above the guidance. Our adjusted EBITDA was a loss of $5.5 million, smaller than anticipated loss compared to our guidance.

Speaker #3: We are also seeing healthy traction with our newest BS6320 chip. As a reminder, this is the first and only high-performance USB 3.2 extension solution built on a dedicated chip.

Speaker #3: Continuing the momentum, in Q1, we saw another major AV manufacturer release to the market a product based on the BS6320. We are encouraged by the continued adoption of this innovative chip as we move further into 2026.

Speaker #3: As a reminder, this chip is the only one on the market that can extend uncompressed HDMI 2.0 over widely used category cable. In Q1, we saw additional products hit the market based on this chip.

Yoram Salinger: As a reminder, this chip is the only one on the market that can extend uncompressed HDMI 2.0 over widely used category cable. In Q1, we saw additional products hit the market based on this chip. One exciting example came from a leading AV manufacturer, Extron, which released to the market new matrix switches built for premium collaboration spaces, what they're calling the DTP3 CrossPoint 42 series. Our chip is a cornerstone technology underpinning this product, supporting uncompressed video, audio, and controls up to 330 feet. This is great news for Valens, as the VS3000 is the most advanced HDBaseT chip we offer and is a pillar of the growth opportunity in our core audio/video market. We are also seeing healthy traction with our newest VS6320 chip.

Speaker #3: Both chips features notably at our booth during key first quarter events CES in January and ISE in February. Across both events, our customers and partners were enthusiastic about our technology demonstrations and the innovations our chips can enable.

Speaker #3: Innovations like multi-camera extension over a single-cast cable, single-box extension of uncompressed 4K video, and USB 3. Streamlined infrastructure supporting multiple cameras and sources and full-room conferencing set up with USB-C to USB-C extension.

Speaker #3: Our chip is a cornerstone technology underpinning this product, supporting uncompressed video audio and controls up to 330 feet. This is great news for Valens as the BS3000 is the most advanced HD-based chip we offer, and is a pillar of the growth opportunity in our core audio-video market.

Speaker #3: We look forward to replicating the success of those events at additional audio-video focus showers around the world, including the upcoming Infocom International Show in Las Vegas.

Speaker #3: I'd like to turn now into the automotive industry. Our opportunity in automotive is dominated by the VA7000 chipset, which offers high-performance connectivity of cameras and radars used in ADAS and autonomous driving.

Speaker #3: We are also seeing healthy traction with our newest BS6320 chip. As a reminder, this is the first and only high-performance USB 3.2 extension solution built on a dedicated chip.

Yoram Salinger: As a reminder, this is the first and only high-performance USB 3.2 extension solution built on a dedicated chip. Continuing the momentum in Q1, we saw another major AV manufacturer release to the market a product based on the VS6320. We are encouraged by the continued adoption of this innovative chip as we move further into 2026. Both chips featured notably at our booth during key Q1 events, CES in January and ISE in February. Across both events, our customers and partners were enthusiastic about our technology demonstration and the innovations our chips can enable. Innovations like multi-camera extension over a single cat cable, single box extension of uncompressed 4K video, and USB 3. Streamlined infrastructure supporting multiple cameras and sources and full room conferencing set up with USB-C to USB-C extension.

Speaker #3: The VA7000 is the first chipset on the market to comply with the MIPI A5 standard. Our ability to promote this chipset hinges not only on its clear technological advantages for OEMs, but also in the compliance with the standard.

Speaker #3: Continuing the momentum in Q1, we saw another major AV manufacturer release to the market a product based on the BS6320. We are encouraged by the continued adoption of this innovative chip as we move further into 2026.

Speaker #3: As you know, the automotive industry has been actively working to move away from proprietary solution driven by concerns around vendor lock-in and supply chain uncertainty.

Speaker #3: The defining characteristic of a true standard is interoperability. That A5 compliant components from different suppliers can work together seamlessly. In Q1, we demonstrated exactly that at Auto China.

Speaker #3: Innovations like multi-camera extension over a single cast cable, single box extension of uncompressed 4K video, and USB 3. Streamlined infrastructure supporting multiple cameras and sources and full-room conferencing set up with USB-C to USB-C extension.

Speaker #3: A Valens decentralizer connected to A5 serializers from two other service vendors. This marks the first free company demonstration of any interoperable service connectivity solution anywhere in the world for any service standard.

Speaker #3: We look forward to replicating the success of those events at additional audio-video focus showers around the world, including the upcoming Infocom International Show in Las Vegas.

Yoram Salinger: We look forward to replicating the success of those events at additional audio/video-focused show around the world, including the upcoming InfoComm International Show in Las Vegas. I'd like to turn now into the automotive industry. Our opportunity in automotive is dominated by the VA7000 chipset, which offers high-performance connectivity of cameras and radars used in ADAS and autonomous driving. The VA7000 is the first chipset on the market to comply with the MIPI A-PHY standard. Our ability to promote this chipset hinges not only on its clear technological advantages for OEMs, but also in the compliance with the standard. As you know, the automotive industry has been actively working to move away from proprietary solutions driven by concerns around vendor lock-in and supply chain uncertainty.

Speaker #3: This is not just technical milestones. It directly reinforces one of the core value propositions of our A5 offering, eliminating vendor lock-in reducing supply chain risks and enabling a more flexible multi-vendor ecosystem for the OEMs.

Speaker #3: Of course, we continue to participate in several other evaluation processes at various stages with multiple OEMs. With that, I would like to turn the call to Guy, to discuss our financial performance in more detail.

Speaker #4: Thank you, Yoram. I will start with our first quarter of 2026 results and then provide our outlook for the second quarter of 2026. We achieved quarterly revenues of 16.9 million dollars, which exceeded our guidance of between 16.3 million dollars to 16.7 million dollars.

Speaker #3: As you know, the automotive industry has been actively working to move away from proprietary solution driven by concerns around vendor lock-in and supply chain uncertainty.

Speaker #4: This compares to revenues of 19.4 million dollars in Q4 2025 and 16.8 million dollars in Q1 2025. The cross-industry business, or CIB, accounted for 11 million dollars or approximately 65% of total revenues.

Yoram Salinger: The defining characteristic of a true standard is interoperability, that A-PHY compliant components from different suppliers can work together seamlessly. In Q1, we demonstrated exactly that at Auto China. Valens' deserializers connected to A-PHY serializers from 2 other SerDes vendors. This marks the first cross-company demonstration of any interoperable SerDes connectivity solution anywhere in the world for any SerDes standard. This is not just technical milestones. It directly reinforces one of the core value propositions of our A-PHY offering, eliminating vendor lock-in, reducing supply chain risks, and enabling a more flexible multi-vendor ecosystem for the OEMs. Of course, we continue to participate in several other evaluation processes at various stages with multiple OEMs. With that, I would like to turn the call to Guy to discuss our financial performance in more detail.

Speaker #3: At Valens, decentralizers connected to A5 serializers from two other service vendors. This marks the first pre-company demonstration of any interoperable service connectivity solution anywhere in the world for any service standard.

Speaker #4: While automotive contributed 5.9 million dollars or approximately 35% of total revenues this quarter. This compares to Q4 2025 revenues of 13.9 million dollars, from CIB, and 5.5 million dollars from automotive, which represented approximately 70% and 30% of total revenues respectively.

Speaker #4: It also compares to Q1 2025 revenues of 11.7 million dollars from the CIB and 5.1 million dollars from automotive, representing 70% and 30% of total revenues respectively.

Speaker #4: Q1 2026 gross profit was 10.5 million dollars, compared to 11.7 million dollars in the fourth quarter of 2025, and compared to 10.6 million dollars in the first quarter of 2025.

Speaker #4: Thank you, Yoram. I will start with our first quarter of 2026 results and then provide our outlook for the second quarter of 2026. We achieved quarterly revenues of $16.9 million, which exceeded our guidance of between $16.3 million to $16.7 million.

Guy Nathanzon: Thank you, Yoram. I will start with our Q1 2026 results and then provide our outlook for Q2 2026. We achieved quarterly revenue of $16.9 million, which exceeded our guidance of between $16.3 million to $16.7 million. This compares to revenues of $19.4 million in Q4 2025 and $16.8 million in Q1 2025. The cross-industry business, or CIB, accounted for $11 million, or approximately 65% of total revenues, while automotive contributed $5.9 million, or approximately 35% of total revenues this quarter. This compares to Q4 2025 revenues of $13.9 million from CIB and $5.5 million from automotive, which represented approximately 70% and 30% of total revenues, respectively.

Speaker #4: Q1 2026 gross margin was 62.2%, compared to our guidance of between 57% to 59%. This compares to a Q4 2025 gross margin of 60.5% and Q1 2025 of 62.9%.

Speaker #4: This compares to revenues of $19.4 million in Q4 2025 and $16.8 million in Q1 2025. The cross-industry business, or CIB, accounted for $11 million or approximately 65% of total revenues.

Speaker #4: On a segment basis, Q1 2026 gross margin from the cross-industry business was 70.8% and gross margin from automotive was 46.2%. This compares to a Q4 2025 gross margin of 66.4% and 45.9%, respectively.

Speaker #4: While automotive contributed $5.9 million or approximately 35% of total revenues this quarter. This compares to Q4 2025 revenues of $13.9 million, from CIB, and $5.5 million from automotive, which represented approximately 70% and 30% of total revenues respectively.

Speaker #4: And a Q1 2025 gross margin of 69.1% and 48.4%, respectively. The increase in the gross margin of the CIB compared to Q4 2025 was mainly due to product mix.

Speaker #4: Non-GAAP gross margin in Q1 was 65.2%, which compares to 63.9% in Q4 2025 and 66.7% in Q1 2025. Operating expense in Q1 2026 totaled 19.4 million dollars, compared to 20.9 million dollars at the end of Q4 2025 and 20 million dollars in Q1 2025.

Speaker #4: It also compares to Q1 2025 revenues of $11.7 million, from the CIB, and $5.1 million from automotive, representing 70% and 30% of total revenues respectively.

Guy Nathanzon: It also compares to Q1 2025 revenues of $11.7 million from the CIB and $5.1 million from automotive, representing 70% and 30% of total revenues, respectively. Q1 2026 gross profit was $10.5 million compared to $11.7 million in Q4 2025 and compared to $10.6 million in Q1 2025. Q1 2026 gross margin was 62.2% compared to our guidance of between 57% to 59%. This compares to a Q4 2025 gross margin of 60.5% and Q1 2025 of 62.9%. On a segment basis, Q1 2026 gross margin from the cross-industry business was 70.8% and gross margin from automotive was 46.2%.

Speaker #4: Q1 2026 gross profit was $10.5 million, compared to $11.7 million in the fourth quarter of 2025, and compared to $10.6 million in the first quarter of 2025.

Speaker #4: Research and development expense in Q1 totaled 10.3 million dollars, compared to 11.1 million dollars in Q4 2025 and 10.6 million dollars in Q1 2025.

Speaker #4: Q1 2026 gross margin was 62.2%, compared to our guidance of between $57% to $59%. This compares to Q4 2025 gross margin of 60.5% and Q1 2025 of 62.9%.

Speaker #4: FG&A expense in Q1 was 9.4 million dollars, compared to 10.1 million dollars in Q4 2025 and 9.3 million dollars in Q1 2025. GAAP net loss in Q1 was 8.3 million dollars, compared to a net loss of 8.8 million dollars in Q4 2025, and a net loss of 8.3 million dollars in Q1 2025.

Speaker #4: On a segment basis, Q1 2026 gross margin from the cross-industry business was $70.8%, and gross margin from automotive was $46.2%. This compares to Q4 2025 gross margin of $66.4% and $45.9%, respectively.

Speaker #4: Adjusted EBITDA in Q1 was a loss of 5.5 million dollars, below the guidance range of a loss between 7.9 million and 7.5 million dollars.

Guy Nathanzon: This compares to a Q4 2025 gross margin of 66.4% and 45.9%, respectively, and a Q1 2025 gross margin of 69.1% and 48.4%, respectively. The increase in the gross margin of the CIB compared to Q4 2025 was mainly due to product mix. Non-GAAP gross margin in Q1 was 65.2%, which compares to 63.9% in Q4 2025 and 66.7% in Q1 2025. Operating expense in Q1 2026 totaled $19.4 million compared to $20.9 million at the end of Q4 2025 and $20 million in Q1 2025.

Speaker #4: This compares to an adjusted EBITDA loss of 4.3 million dollars in Q4 2025 and an adjusted EBITDA loss of 4.3 million dollars in Q1 2025.

Speaker #4: And Q1 2025 gross margin of $69.1% and $48.4%, respectively. The increase in the gross margin of the CIB compared to Q4 2025 was mainly due to product mix.

Speaker #4: GAAP loss per share in Q1 was 8 cents, compared to a GAAP loss per share of 9 cents for Q4 2025 and a GAAP loss per share of 8 cents for Q1 2025.

Speaker #4: Non-GAAP gross margin in Q1 was $65.2%, which compares to $63.9% in Q4 2025 and $66.7% in Q1 2025. Operating expense in Q1 2026 totaled $19.4 million, compared to $20.9 million at the end of Q4 2025 and $20 million in Q1 2025.

Speaker #4: Non-GAAP loss per share in Q1 was 5 cents, compared to a loss per share of 4 cents in Q4 2025 and a loss per share of 3 cents in Q1 2025.

Speaker #4: The difference between GAAP and non-GAAP loss per share was mainly due to stock-based compensation and depreciation and amortization expense. Now turning to the balance sheet.

Speaker #4: Research and development expense in Q1 totaled $10.3 million, compared to $11.1 million in Q4 2025 and $10.6 million in Q1 2025. FG&A expense in Q1 was $9.4 million, compared to $10.1 million in Q4 2025 and $9.3 million in Q1 2025.

Guy Nathanzon: Research and development expense in Q1 totaled $10.3 million compared to $11.1 million in Q4 2025 and $10.6 million in Q1 2025. SG&A expense in Q1 were $9.4 million compared to $10.1 million in Q4 2025 and $9.3 million in Q1 2025. GAAP net loss in Q1 was $8.3 million compared to a net loss of $8.8 million in Q4 2025 and a net loss of $8.3 million in Q1 2025. Adjusted EBITDA in Q1 was a loss of $5.5 million below the guidance range of a loss between $7.9 million and $7.5 million.

Speaker #4: We ended Q1 with cash, cash equivalents, and short-term deposits totaling 86.1 million dollars, and no debt. This compares to 92.6 million dollars at the end of Q4 2025 and 112.5 million dollars at the end of Q1 2025.

Speaker #4: Our working capital at the end of the first quarter was 91.3 million dollars, compared to 95.7 million dollars at the end of Q4 2025 and 119.8 million dollars at the end of Q1 2025.

Speaker #4: GAAP net loss in Q1 was $8.3 million, compared to a net loss of $8.8 million in Q4 2025, and a net loss of $8.3 million in Q1 2025.

Speaker #4: Adjusted EBITDA in Q1 was a loss of $5.5 million, below the guidance range of a loss between $7.9 million and $7.5 million. This compares to an adjusted EBITDA loss of $4.3 million in Q4 2025 and an adjusted EBITDA loss of $4.3 million in Q1 2025.

Speaker #4: Our inventory as of March 31, 2026 was 10.9 million dollars and increased from 10.1 million dollars on December 31, 2025, and 10.9 million dollars on March 31, 2025.

Guy Nathanzon: This compares to an adjusted EBITDA loss of $4.3 million in Q4 2025 and an adjusted EBITDA loss of $4.3 million in Q1 2025. GAAP loss per share in Q1 was $0.08 compared to a GAAP loss per share of $0.09 for Q4 2025 and a GAAP loss per share of $0.08 for Q1 2025. Non-GAAP loss per share in Q1 was $0.05 compared to a loss per share of $0.04 in Q4 2025 and a loss per share of $0.03 in Q1 2025. The difference between GAAP and non-GAAP loss per share was mainly due to stock-based compensation and depreciation and amortization expense. Now turning to the balance sheet.

Speaker #4: Now I would like to provide our guidance for the second quarter of 2026. We expect Q2 revenues to be in the range of 17.2 to 17.6 million dollars.

Speaker #4: GAAP loss per share in Q1 was $0.08, compared to a GAAP loss per share of $0.09 for Q4 2025 and a GAAP loss per share of $0.08 for Q1 2025.

Speaker #4: We expect gross margin for Q2 to be in the range of 60% to 62%, and we expect adjusted EBITDA loss in Q2 to be in the range of 4.9 to 4.4 million dollar loss.

Speaker #4: Non-GAAP loss per share in Q1 was $0.05, compared to a loss per share of $0.04 in Q4 2025 and a loss per share of $0.03 in Q1 2025.

Speaker #4: As a reminder, our full-year guidance is unchanged between 75 to 77 million dollars. Before turning the call back to Yoram, I would like to take a moment to share that I will be leaving Valens on July 13 to pursue new opportunities.

Speaker #4: The difference between GAAP and non-GAAP loss per share was mainly due to stock-based compensation and depreciation and amortization expense. Now turning to the balance sheet.

Speaker #4: We ended Q1 with cash, cash equivalents, and short-term deposits totaling $86.1 million. And note that this compares to $92.6 million at the end of Q4 2025 and $112.5 million at the end of Q1 2025.

Guy Nathanzon: We ended Q1 with cash equivalents, and short-term deposits totaling $86.1 million and no debt. This compares to $92.6 million at the end of Q4 2025 and $112.5 million at the end of Q1 2025. Our working capital at the end of Q1 was $91.3 million compared to $95.7 million at the end of Q4 2025 and $119.8 million at the end of Q1 2025. Our inventory as of 31 March 2026 was $10.9 million, an increase from $10.1 million on 31 December 2025 and $10.9 million on 31 March 2025. Now, I would like to provide our guidance for Q2 2026.

Speaker #4: I would like to take this opportunity to thank the exceptional team of Valens for professionalism and dedication. Valens has incredible technology that is in the high demand across industries.

Speaker #4: And I'm confident that Yoram and the executive team will take the company to new heights. I'll now turn the call back to Yoram for his closing remarks before opening the call for Q&A.

Speaker #4: Our working capital at the end of the first quarter was $91.3 million, compared to $95.7 million at the end of Q4 2025 and $119.8 million at the end of Q1 2025.

Speaker #4: Thank you, Guy. On a personal note, I'd like to thank you for your significant contribution to Valens over the recent years. I enjoyed working with you and I hope our paths cross again in the future.

Speaker #4: Our inventory as of March 31, 2026, was $10.9 million, an increase from $10.1 million on December 31, 2025, and $10.9 million on March 31, 2025.

Speaker #4: I will note that the company has initiated a search for a replacement and we look forward to welcoming them to the team in due course.

Speaker #4: I believe that Valens is well positioned for success, leveraging our superior technology and robust balance sheet focusing on our core markets. I'm committed to driving meaningful growth opportunities as we move further into 2026 and beyond.

Speaker #4: Now I would like to provide our guidance for the second quarter of 2026. We expect Q2 revenues to be in the range of $17.2 to $17.6 million.

Guy Nathanzon: We expect Q2 revenues to be in the range of $17.2 to $17.6 million. We expect gross margin for Q2 to be in the range of 60% to 62%, and we expect adjusted EBITDA loss in Q2 to be in the range of $4.9 to $4.4 million loss. As a reminder, our full year guidance is unchanged between $75 to $77 million. Before turning the call back to Yoram, I would like to take a moment to share that I will be leaving Valens on 13 July to pursue new opportunities. I would like to take this opportunity to thank the exceptional team of Valens for professionalism and dedication. Valens has incredible technology that is in the high demand across industries, and I'm confident that Yoram and the executive team will take the company to new heights.

Speaker #4: We expect gross margin for Q2 to be in the range of 60% to 62%, and we expect adjusted EBITDA loss in Q2 to be in the range of $4.9 to $4.4 million.

Speaker #4: With that, I'll now open the call to answer your questions. Operator, thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad.

Speaker #4: As a reminder, our full-year guidance is unchanged, between $75 to $77 million. Before turning the call back to Yoram, I would like to take a moment to share that I will be leaving Valens on July 13 to pursue new opportunities.

Speaker #4: If you would like to withdraw your question, simply press star one again. Your first question comes from a line of Quinn Bolton from Needham and Company.

Speaker #4: Your line is open.

Speaker #5: Hey, everyone. This is Neil Young. I'm for Quinn Bolton. Thanks for letting us ask some questions. So the first question I wanted to ask was, could you touch on what drove the quarter-over-quarter decline in CIB?

Speaker #5: And within auto, how much of the strength was sustainable end demand versus timing inventory or customer ordering patterns? Was the auto upside still largely driven by Mercedes?

Speaker #4: And I'm confident that Yoram and the executive team will take the company to new heights. I'll now turn the call back to Yoram for his closing remarks before opening the call for Q&A.

Guy Nathanzon: I'll now turn the call back to Yoram for his closing remarks before opening the call for Q&A.

Speaker #5: Or are you starting to see contribution from AFI ecosystem activity, mobile eye-related programs, or any other customers? And then I have a follow-up. Thank you.

Yoram Salinger: Thank you, Guy Nathanzon. On a personal note, I'd like to thank you for your significant contribution to Valens over the recent years. I enjoyed working with you, and I hope our paths cross again in the future. I will note that the company has initiated a search for a replacement, and we look forward to welcoming them to the team in due course. I believe that Valens is well-positioned for success, leveraging our superior technology and robust balance sheet, focusing on our core markets. I'm committed to driving.

Speaker #6: Thanks for the question. So I'll start off by addressing the CIB result. When we kind of shared our guidance for the quarter, we said that we anticipate that there's going to be somewhat slowness in Q1 due to seasonality and a very strong Q4.

Speaker #4: I will note that the company has initiated a search for a replacement and we look forward to welcoming them to the team in due course.

Speaker #4: I believe that Valens is well positioned for success. Leveraging our superior technology and robust balance sheet focusing on our core markets, I'm committed to driving meaningful growth opportunities as we move further into 2026 and beyond.

Speaker #6: That was actually the case. I want to reiterate that the guidance for the year is still remaining strong. So it's not it has nothing to do with the demand and the anticipated growth in CIB over the year.

Speaker #6: Regarding the automotive, everything that you said regarding Mercedes is actually true. It has to do with the demand from Mercedes related to their sales of cars and therefore the uptake comes from Mercedes.

Speaker #4: If you would like to withdraw your question, simply press star one again. Your first question comes from a line of Quinn Bolton from Needham & Company.

Speaker #4: Your line is open.

Speaker #6: Regarding the AFI project, those are going to kind of factor in in 2027. Just want to make a comment that those projects are advancing well aligned with the timeline.

Speaker #5: And within auto, how much of the strength was inventory or customer ordering patterns? Was the auto upside still largely driven by Mercedes? Or are you starting to see contribution from AFI ecosystem activity, mobile eye-related programs, or any other customers?

Speaker #6: So we feel very confident that those wins would obviously impact our kind of revenues in the coming years.

Speaker #5: And then I have a follow-up. Thank you.

Speaker #5: Great. Thanks. And then I did want to ask about the full-year guide. So you got into Q2 17.4 at the midpoint. What's the first half revenue at 34.3 million?

Speaker #5: And you're talking about the full-year guide, midpoint of 76. I would say that implies a meaningful step up in the second half. I guess what gives you the confidence in that second half ramp?

Speaker #5: And how should investors think about the acceleration? Should it primarily come in CIB, continue to automotive strength? Any comment would be helpful. Thanks.

Speaker #6: So let me reiterate. Second half of 2026 is going to be way stronger than the first half. Our confidence in that has to do with a design-in or design wins and then a design-in into our customers' product.

Speaker #6: Regarding the automotive, everything that you've said regarding Mercedes is actually true. It has to do with the demand from Mercedes related to their sales of cars and therefore the uptake comes from Mercedes.

Speaker #6: We have visibility to launch of those products throughout the year. And therefore, the confidence is kind of reassured by actually monitoring how those products are going to hit the market and actually drive the growth in Q3 and Q4.

Speaker #6: Regarding the AFI project, those are going to kind of factor in in 2027. Just want to make a comment that those projects are advancing well aligned with the timeline.

Speaker #5: Great. Thanks.

Speaker #6: So we feel very confident that those wins would obviously impact our kind of revenues in coming years.

Speaker #6: Sorry?

Speaker #5: My apologies. Your next question comes from a line of Rick Schafer from Oppenheimer. Your line is open.

Speaker #7: Hi. This is Wei Mok on the line for Rick. Thanks for taking the question. And best of luck, Guy. Your next endeavors for my first question, I wanted to follow up on CIB.

Speaker #5: Great. Thanks. And then I did want to ask about the full-year guide. So you got into Q2 to $17.4 at the midpoint, puts for staff revenue at $34.3 million.

Speaker #7: It looks like it was down. And you mentioned it looks like it was going to be some digestion due to some demand that was pulled into 4Q.

Speaker #5: And you're talking about the full-year guide, midpoint of $76. I would say that implies a meaningful step up in the second half. I guess what gives you the confidence in that second half ramp and how should investors think about the acceleration?

Speaker #7: So how do you feel about the digestion? So far, in 1Q, do you think that it has bottomed? Do you expect the correction to persist into 2Q?

Speaker #5: Should it primarily come in CIB, continue to automotive strength? Any comment would be helpful. Thanks.

Speaker #7: Or do you see CIB returning to growth in 2Q? Thanks.

Speaker #6: So let me reiterate. Second half of 2026 is going to be way stronger than the first half. Our confidence in that has to do with the design-ins or design-wins and then design-ins into our customers' product.

Speaker #6: So if I kind of heard your question, you're speaking about growth with CIB. CIB would grow in Q2. As we anticipate the company to grow, according to the guidance provided for Q2, and it would accelerate during Q3 and Q4 even further.

Speaker #6: We kind of see around 5% growth for CIB across the year. So yeah, the growth is there. And it's going to be reflected in the upcoming quarters.

Speaker #5: Great. Appreciate it. Thank you for that. As for my follow-up, your AFI technology was selected by NIPPY as the standard for automotive connectivity. And there's been a lot of talks about across the industry on physical AI.

Speaker #5: Great. Thanks.

Speaker #6: Sorry?

Speaker #5: And I noticed that NIPPY, the NIPPY Alliance, they launched their physical AI birds of feather group for humanoids. And they listed you guys as a member.

Speaker #5: My apologies. Your next question comes from a line of Rick Schafer from Oppenheimer. Your line is open.

Speaker #7: Hi. This is Waymark, on the line for Rick. Thanks for taking the question. And best of luck, Guy. Your next endeavors for my first question, I wanted to follow up on CIB.

Speaker #5: So I was wondering if you can talk about your involvement with this and are you aiming to establish the same goal of using your connectivity standard for physical AI?

Speaker #7: It looks like it was down. And you mentioned it looks like it was going to be some digestion due to some demand that was pulled into 4Q.

Speaker #5: Thanks.

Speaker #6: So thank you for the question. So as you know, Valens is a company that believes in standards, in order to free the industry to interoperate between different vendors.

Speaker #7: So how do you feel about the digestion? So far, in 1Q, do you think that it has bottomed? Do you expect the correction to persist into 2Q?

Speaker #6: And actually prevent lock-in with one specific vendor. So we've been promoting this with AFI for quite some time. And we have reported that we've done interoperability tests and auto China just to prove the strength and the power of actually driving standard-based solutions.

Speaker #7: Or do you see CIB returning to growth in 2Q? Thanks.

Speaker #6: So if I kind of heard your question, you're speaking about growth with CIB. CIB would grow in Q2. As we anticipate the company to grow according to the guidance provided for Q2.

Speaker #6: And it would accelerate during Q3 and Q4 even further. We kind of see around 5% growth for CIB across the year. So yeah, the growth is there.

Speaker #6: That being said, as being members at NIPPY, we participate in different forms that are kind of introduced by NIPPY. Birds of feather suggest that this is an initial view towards physical AI, around robotics and whatnot.

Speaker #6: And it's going to be reflected in the upcoming quarters.

Speaker #5: Great. Appreciate it. Thank you for that. As for my follow-up, your AFI technology was selected by MIPI as the standard for automotive connectivity. And there's been a lot of talks about across the industry on physical AI.

Speaker #6: So as a very active member in NIPPY, our EVP of product, Ido Cohen, is chairing this committee. In order to have the leaders of the industry come together, bring their heads together, in order to see what will be the right way forward.

Speaker #5: And I noticed that MIPI, the MIPI Alliance, they launched their physical AI birds of feather group for humanoids. And they listed you guys as a member.

Speaker #5: So I was wondering if you can talk about your involvement with this and are you aiming to establish the same goal of using your connectivity standard for physical AI?

Speaker #6: So yes, we are involved in that. And I think it just suggests that we're not just active in audio-video and automotive. We are involved in other industries.

Speaker #5: Thanks.

Speaker #6: So thank you for the question. So as you know, Valens is a company that believes in standards, in order to free the industry to interoperate between different vendors.

Speaker #5: Great. Thank you. Again, if you'd like to ask a question, press star one in your telephone keypad. Your next question comes from a line of Dave Storms from Stonegate.

Speaker #6: And actually prevent lock-in with one specific vendor. So we've been promoting this with AFI for quite some time. And we have reported that we've done interoperability tests in Auto China, just to prove the strength and the power of actually driving standards-based solutions.

Speaker #5: Your line is open.

Speaker #7: Morning. Thank you for taking my question. Wanted to maybe go back to CIB again. You mentioned that product mix drove the margin higher sequentially.

Speaker #7: Is this durable given the consolidated sequential step back you're expecting in the guide? Or how should we think about that going forward?

Speaker #6: That being said, as being members at MIPI, we participate in different forms that are kind of introduced by MIPI. Birds of feather suggest that this is an initial view towards physical AI, around robotics and whatnot.

Speaker #8: No, I think that was kind of a specific product mix I think that Jeremy is speaking is in line with what we've said a few months ago about the long-term goals of the CIB.

Speaker #8: And it's slight increase versus the last quarter. And it looks like it is in line with our long-term goals.

Speaker #7: Understood. Thank you. And then maybe just a macro question. Are tariffs maybe still the main headwinds that you're facing? Or do some of these conflicts in Iran pose additional charges for shipping or materials?

Speaker #6: So as a very active member in MIPI, our EVP of product, Ido Cohen, is chairing this committee. In order to have the leaders of the industry come together, bring their heads together, in order to see what will be the right way forward.

Speaker #7: How should we think about maybe current macro environment?

Speaker #6: So we currently don't see any effect of tariffs. This has been going on for a while now. So I don't think us being commentating on tariffs is something that we could add value to this discussion.

Speaker #6: So yes, we are involved in that. And I think it just suggests that we're not just active in audio-video and automotive. We are involved in other industries.

Speaker #5: Great, thank you. Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Dave Storms from Stonegate.

Speaker #6: Obviously, supply chain is being a challenge due to increased demand for AI and memory in silicon. Just want to make sure that the message comes across: we don't see any risks in our ability to meet our targets for the year.

Speaker #5: Your line is open.

Speaker #7: Morning. Thank you for taking my question. Wanted to maybe go back to CIB again. You mentioned that product mix drove the margin higher sequentially.

Speaker #7: Is this durable given the consolidated sequential step back you're expecting in the guide? Or how should we think about that going forward?

Speaker #6: And therefore, it's basically staying on top of the demand for our products and supplying the demand that is being created by our customers for the year and for the coming years.

Speaker #8: No, I think that was kind of a specific product mix. I think that generally speaking, it's in line with what we've said a few months ago about the long-term goals of the CIB.

Speaker #5: And there are no further questions at this time. I will now turn the call back over to Yoram Salinger for closing remarks.

Speaker #8: And it's slight increase versus the last quarter. And it looks like it is in line with our long-term goals.

Speaker #8: I would like to thank you all for joining us today for our first quarter 2026 earning call. And for your continued support and interest in Valens Semiconductor.

Speaker #8: Hope to meet you again in our next earning call. Thank you.

Speaker #7: How should we think about maybe current macro environment?

Speaker #6: Obviously, supply chain is being a challenge due to increased demand for AI, and memory in silicon. Just want to make sure that the message comes across: we don't see any risks in our ability to meet our targets for the year.

Speaker #6: And therefore, it's basically staying on top of the demand for our products. And supplying the demand that is being created by our customers for the year and for the coming years.

Speaker #5: And there are no further questions at this time. I will now turn the call back over to your Ram Salinger for closing remarks.

Speaker #8: I would like to thank you all for joining us today for our first quarter 2026 earnings call, and for your continued support and interest in Valens Semiconductor.

Speaker #8: Hope to meet you again in our next earning call.

Speaker #6: Thank you.