Valens Semiconductor Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025

There are 8 speakers on the call.

Operator

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 twenty twenty five 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.

Operator

I will now turn the call over to Michal Benari, Investor Relations for Valens Semiconductor. Please go ahead.

Speaker 1

Thank you, and welcome, everyone, to Valens Semiconductor's first quarter twenty twenty five earnings call. With me today are Gideon Bensley, Chief Executive Officer and Guy Natanzon, Chief Financial Officer. Earlier today, we issued a press release that is available on the Investor Relations section of our website under investors.valent.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.

Speaker 1

Please refer to our annual report on Form 20 F filed with the SEC on 02/26/2025, 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 will now turn the call over to Gideon.

Speaker 2

Thank you, Michal. Hello, everyone, and thank you for joining us. Valens kicked off 2025 on a high note, delivering solid performance across key metrics. We reported revenues of $16,800,000 which exceeded the top end of our guidance. GAAP gross margin for the first quarter came in at 62.9%, above the guidance, and adjusted EBITDA loss was $4,300,000 within the guidance range.

Speaker 2

Beyond the numbers, I'd like to highlight some of our key achievements in Q1 that reinforce my confidence in our growth potential for the near future. And I will start with our cross industry business unit, or CIB, which consists of a variety of industries, professional audiovideo, industrial machine vision and medical. In ProYB last quarter, inventory digestion continued to impact our sales. But as expected, we are emerging from the bottom of the cycle. As such, we are seeing an increasing interest in our solutions, which are currently being integrated into products that are set to hit the market by the middle of twenty twenty six.

Speaker 2

The interest of our ProAV solutions was most apparent during a couple of industry events. First, in February, we were at ICE, the industry's most renowned international conference for innovations in video conferencing, education, digital signage, entertainment, and more. There, we showcase a variety of meeting rooms set up spout by our latest chipset, the VSS three twenty and the VSS 7,000. We also announced the integration of this chipset into next gen products from top manufacturers and showcasing products from customers such as Sennheiser and Logitech. These partnerships reflect key industry trends, more rooms, more displays, more video equipment, all creating more opportunities for Valens.

Speaker 2

Second, in Infocom China in April, we were honored with a Best of Show Editor's Choice Award in the Best Technology Application category. This award was for our innovation in USB three extension with our v s sixty three twenty chip and is further testament to the superiority of our technology. Infocom China is an influential conference, and China is a large and growing market. So this sort of recognition is important as we continue to promote our chipset offering. As mentioned in previous calls, we are seeing growing adoption of our v s sixty three twenty chipset for the extension of US memory.

Speaker 2

There are now over 70 products that have hit the market with over chip inside. Examples of recently released sixty three twenty based products include whole technologies, discoveries, three series, immunogeny, UV volt blades, and pro IPAV extenders, all of which hit the market over the last couple of months. Staying with our cross industry business unit, I would like to discuss another industry, machine vision, where once again, a recent international conference, shined the spotlight of our technology with very positive customer feedback. In March, at the embedded world event in Nuremberg, we showcased our innovative connectivity solutions, the v a 7,000 and v s sixty three twenty. Initially developed for the automotive and project industries, these chipsets are already proven and mass produced and are now being repurposed to extend commonly used machine vision protocols.

Speaker 2

At the conference, we met with the leading players in the industry, all of whom were impressed by our technology. There is no substitute for seeing live demonstrations of our chipset, and this renowned industry event was an excellent opportunity to further broaden our customer base. Our project with leading machine vision players continue to progress, and we're confident that our A5 based solution will soon begin to wedge this industry open. One machine vision partnership I would like to mention, which we announced just prior to the show, is with Argo Robotics and Cherry Integrated Solutions. This collaboration integrates Argo's advanced risk perception engine, Valens v eight seven thousand chipsets, and Cherry rock chip based hardware module.

Speaker 2

The collaboration delivers unprecedented design flexibility, cost efficiency, and performance for mobile machine manufacturers enabling AI robotics applications. Valens chipsets offer a number of important advantages in this industry. Third, Valens chips support the highest resolution video, increasing the precision of automated machine vision solution. Second, the Valens chips are standardized, facilitating the implementation of smaller form factor camera modules. Third, like all our other chips, Valens solutions are the most EMI resilience on the market, important for ensuring twenty four seven operation in the noisy electromagnetic environment of the factory floor.

Speaker 2

And fourth, due to their ability to operate over low cost cables and connectors, these chipsets enable significant total system cost reduction. Kieran was the head of BD as Cherry had to say, and I quote, the addition of the latest b 7,000 MiPi AI connectivity into our portfolio opens new opportunity for our platform, end of quote. The cofounder and CEO of Arbor Robotics agreed, and I quote again, our robotics perception engine demands high quality video data, and that's acceptable to the less connectivity solution provide while allowing us to distance the processing unit from the sensors and the quote. Next week, at Automated Choice, we will be showcasing our machine vision solutions with partners that are adding API technology to their platforms such as D3 embedded and Tramos. In addition, our API chipset has been shortlisted for the show's innovation award.

Speaker 2

We are very proud of this industry's recognition. In all, we continue to support our customers in bringing solutions to the market based on our v a 7,000 and v s sixty three twenty chipsets, and we are confident that the machine vision industry will become an even more significant source of revenues for us before long. We expect initial revenue from the end of twenty twenty six with significant potential growth during the following years. I would like to turn now to the automotive industry. As a reminder, our opportunity in automotive is dominated by the V eight seven thousand chipset, the first in the industry to comply with the MIPI A5 standard for high speed sensor connectivity.

Speaker 2

Late last year, we announced three design wins with leading European OEM solution, gaining a strong foothold for A5 within the OEM community. The momentum from EP A5 continued to build in Q1 twenty twenty five as we announced two significant milestones. The first is that Mobilize, a global leader in data systems, selected our chips for the in car sensor to compute connectivity infrastructure for Mobilize iQ6 high production programs underway with a group of global automotive brands. That is to say, the design wins we announced last year came about through a strong collaboration with one of the most central automotive tier one in the industry, Mobileye. Most importantly, announcing this partnership, are signaling to the OEM community that A5 is the backing of the key industry player like Mobileye and that they will be working with us to bring this solution to other OEMs around the world.

Speaker 2

Here is what the executive vice president of engineering in Mobileye said, quote, MIPI A5 delivers efficient and robust high performance standardized connectivity, and we look forward to working with Valens to broaden the mid p a by ecosystem and deliver this technology to more market leading automakers and sports. The second significant milestone that we announced is the successful interoperability with seven vendors of a five silicon. Notice interoperability is a hallmark of any true standard. So having multiple suppliers for MEPE API can only broaden the API or the aPi as I like to call it. I will make special mention to one of these a five vendors, Omnivision, a global supplier of imaging solutions of automotive OEMs, which is integrating a five directly inside the sensor.

Speaker 2

After Sony, Omnivision is the second major company to announce this type of integration, which is only possible because a five is a standard. Here is what the senior director of design and Omnivision said, quote, integrating MeetMe A5 directly into our sensors provides significant value for OEM customers and partners, end quote. I would like to take a moment to discuss the growth of MiPiAFA in China. We are hearing that the Chinese automotive ecosystem is rapidly adopting the A5 standard from a variety of local A5 silicon vendors to Tier two and Tier one supplier designing around this specification to significant interest from OEMs in this technology. Of course, China is unlike any other country in the world.

Speaker 2

They are fast to adopt new technologies, but there are also a series of regulations that we are required to adhere to when attempting to penetrate this market. To address some of these challenges, we have partnered with the local Chinese firm, ES Wing Computing, to present Chinese automakers the opportunity to source locally manufactured production ready MiPi a five chipsets for both sensor and display connectivity. This partnership allows us to access the large and gross MiPi A5 business opportunity that exists in the Chinese market. Additionally, with regards to our activities in China, we were proud to display our A5 technology at the Auto Shanghai Conference at the April. At our booth, we unveiled a number of AFi demonstration with major players in the automotive industry.

Speaker 2

First, we have Qualcomm's Snapdragon ride for evaluation platform with AFi connectivity. Second, we have Cheniere's tier one supply, the size SV with AI technology system. Third, we have the Rival Robotics journey platform with AI, and finally, an ADAS reference design with SigmaStar based on AI. It's clear that the momentum around A5 continues to build. We continue to participate in several evaluation processes at various stages with multiple OEMs.

Speaker 2

With that, I will turn the call to Guy to discuss our financial performance in more detail.

Speaker 3

Thank you, Gideon. I'll start with our first quarter twenty twenty five results and then provide our outlook for the second quarter. We achieved quarterly revenue of $16,800,000 which exceeded our guidance of between $16,300,000 to $16,600,000 This compares to revenue of $16,700,000 in Q4 twenty twenty four and $11,600,000 in Q1 twenty twenty four. The cross industry business, or CIB, accounted for $11,700,000 or approximately 70% of total revenue, while automotive contributed 5,100,000 or approximately 30% of total revenue this quarter. This compares to Q4 twenty twenty four revenue of $11,700,000 from CIB and $5,000,000 from automotive, which represented 7030% of total revenue, respectively.

Speaker 3

It also compares to Q1 twenty twenty four revenue of $7,200,000 from the CIB and $4,400,000 from automotive, representing 6040% of total revenue, respectively. In Q1 twenty twenty five, gross profit was $10,600,000 compared to $10,100,000 in the fourth quarter of twenty twenty four and compared to $6,800,000 in the first quarter of twenty twenty four. Q1 '20 '20 '5 gross margin was 62.9% compared to our guidance of between sixty point eight percent and sixty one point three percent. This compares to Q4 twenty twenty four gross margin of 60.4% and Q1 twenty twenty four of 59%. On a segment basis, Q1 twenty twenty five gross margin from the cross industry business was 69.1%, and gross margin from automotive was 48.4%.

Speaker 3

This compares to a Q4 twenty twenty four gross margin of 64.750.5%, respectively, and a Q1 twenty twenty four gross margin of 77.229.1%, respectively. The increase in gross margin of the cross industry business, CIB, compared to Q4 twenty twenty four was due to an inventory adjustment in Q4 twenty twenty four. The increase in Q1 twenty twenty five automotive gross margin compared to Q1 twenty twenty four was due to an optimization of our product costs. Non GAAP gross margin in Q1 was 66.7%, which compares to a 64.5% in Q4 twenty twenty four and sixty two percent in Q1 twenty twenty four. Operating expenses in Q1 twenty twenty five totaled $20,000,000 compared to $18,500,000 at the end of Q4 twenty twenty four and $18,100,000 in Q1 twenty twenty four.

Speaker 3

Research and development expenses in Q1 totaled $10,600,000 compared to $10,100,000 in Q4 twenty twenty four and $10,100,000 in Q1 twenty twenty four. SG and A expenses in Q1 were $9,300,000 compared to $8,300,000 in Q4 twenty twenty four and $8,000,000 in Q1 twenty twenty four. GAAP net loss in Q1 was $8,300,000 compared to a net loss of $7,300,000 in Q4 twenty twenty four and a net loss of $10,000,000 in Q1 twenty twenty four. Adjusted EBITDA in Q1 was a loss of $4,300,000 within the guidance range of a loss between $4,500,000 and $4,200,000 This compares to an adjusted EBITDA loss of $3,700,000 in Q4 twenty twenty four and an adjusted EBITDA loss of $7,100,000 in Q1 twenty twenty four. GAAP loss per share for Q1 was $0.8 compared to a GAAP loss per share of $07 for Q4 twenty twenty four and a GAAP loss per share of $0.10 for Q1 twenty twenty four.

Speaker 3

Non GAAP loss per share in Q1 twenty twenty five was $03 compared to a loss per share of $02 in Q4 twenty twenty four and a loss per share of $0.7 in Q1 twenty twenty four. The difference between GAAP and non GAAP loss per share was due to stock based compensation and depreciation and amortization expenses. Now turning to the balance sheet. We ended Q1 twenty twenty five with cash, cash equivalents and short term deposits totaling $112,500,000 and no debt. This compares to $131,000,000 at the end of Q4 twenty twenty four and $139,800,000 at the end of Q1 twenty twenty four.

Speaker 3

In November 2024, we announced a first share repurchase plan of up to $10,000,000 and in February 2025, on another plan of up to $15,000,000 During the quarter, we spent $9,600,000 on both plans. Our working capital at the end of the first quarter was $119,800,000 compared to $133,600,000 at the end of Q4 twenty twenty four and $153,300,000 at the end of Q1 twenty twenty four. Our inventory as of 03/31/2025, was $10,900,000 a slight increase from $10,200,000 on 12/31/2024, and down from $12,500,000 on 03/31/2024. Now I would like to provide our guidance for the second quarter of twenty twenty five. We expect Q2 revenue to be in the range of $16,500,000 to $16,800,000 We expect gross margin for Q2 of twenty twenty five to be in the range of 63% to 64%, and we expect adjusted EBITDA loss in Q2 twenty twenty five to be in the range of 4,900,000.0 to $4,400,000 loss.

Speaker 3

Before turning the call back to Biren, I want to refer to the new tariffs. While semiconductors are currently exempt from these tariffs, it is still too early to estimate the direct impact on our operations and the impact on our customers' end market demand. We are closely monitoring the situation, and we will provide updates to the investment community as we get more information. I'll now turn the call back to Guidon for his closing remarks before opening the call for q and a.

Speaker 2

Thank you, guys. We believe that Valens Semiconductor is well positioned for a return to growth in our target market, leveraging our industry leading technology and robust balance sheet. We remain committed to executing our long term strategy to drive renewed growth and profitability. Before opening the call for questions, I want to express my gratitude to the entire Valens Global team for their ongoing commitment and dedication. With that, I will open the call to answer your questions.

Speaker 2

Operator?

Operator

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2. If you're using speaker equipment, kindly lift the handset before pressing the numbers.

Operator

Please ask your question in a loud and clear voice. Your questions will be pulled in the order they are received. Please stand by while we poll for your questions. The first question is from Rick Schafer of Oppenheimer. Please go ahead.

Speaker 4

Hi. This is Wei Mok on the line for Rick, and thanks for taking the question. Firstly, congrats on the Mobileye win. I was wondering how does this partnership change the dynamic in which you pursue future OEM wins with Ephi? Since Mobileye is already collaborating across several OEMs, does that by virtue mean you will be working closely with those OEMs?

Speaker 2

Hi, Rick. Thank you for your question, and, I'm happy to answer about actually, almost an invited question, for me. The, Mobileye collaboration is a collaboration which is purely on quality. What Valens provided here is the need to elevate in the quality and the bandwidth of cameras that are coming into the ECU and, of Bombilai. A need that, of course, has more resolution, has more bandwidth, more exposed to a noise that can ruin the whole system.

Speaker 2

And we proved that by this elevation, by this increase in bandwidth, we can do things which others can't. And this is the nature of the deal. About how it will influence other deals, it's time to tell, but the but the, essence is that Mobileye is moving up, is elevating their capabilities and requires better cameras, which provide more data, and we are there for them. So we believe it's even those systems that initially they are installed or have their own design wins with other chips, those customers would like to elevate in some stage, and then we will be there. I guess that if you ask MobilEye, they would, as they said in the in in the press release, they see our solution as a solution that is taking helping them take the connection between the camera and to the ECU up.

Speaker 2

I hope I answered exactly what you but wait. If it's not the the answer, let me know.

Speaker 4

No. Yeah. I was just wondering, the because, Mobileye is already working with, other large OEMs. Are you working directly closer to those OEMs, or will you still be pursuing, OEM design wins independently?

Speaker 2

Well, of course, we are and, you know, this this this market, the market, everyone speaks to everyone. And, the influence is is is quite a matrix if you look at it from above. And yes, we meet the customers and we meet Mobileye. And you know this market is a market that Tier one and Tier two and OEMs are are knowing each other. It's a OEM is always aware who is the Tier two, the Tier one and sometimes even the whole negotiation is done between the Tier two and the OEM and only the technical and the delivery is done through the Tier one.

Speaker 2

The case of Mobileye is different because Mobileye are acting in the market on both as tier one and tier two. So so actually, all answers are right. You there's sometimes you pick the the OEM, some of the tier one, sometimes the both. But in all cases, the OEM is fully aware and involved with the decision as we will be the service.

Speaker 4

Okay. Got it. That's clear. Thank you. And as best for my follow-up, is on tariffs.

Speaker 4

I really appreciate the color that you're not seeing any direct impacts. So what gives you this level of visibility? And while there is no direct impacts, are you seeing any second or third order effects? So any indirect impacts

Speaker 2

to your business from tariffs? Of course, this is something we cannot disclose at this stage. But the nature of this market that an OEM, which is very prestigious, has the the the circles around and the circles around, and that's the the the the whole whole idea of our business model is to create the presence, to start with the strong with those to give us the credibility and to move on. And, when we'll have news to announce, believe me, we will not wait a minute.

Speaker 4

Great. Thank you.

Operator

The next question is from Quinn Bolton of Needham and Company. Please go ahead.

Speaker 5

Hey, guys. Let me offer my congratulations on steady results. I wanted to follow-up on the Mobileye question. Gideon, you mentioned that as camera resolution and bandwidth goes up, that hopefully pushes solutions or customers to adopt your solution. Can you give us a sense?

Speaker 5

Is is there a camera resolution where the incumbent technology that Mobileye uses, with a large semiconductor competitor, you know, maxes out? Like, are we talking eight megapixel resolutions? Does it have to be something higher? Just any any kind of metrics around the resolution where the MIPI a five standard may really start to show dramatic, you know, benefits relative to the Texas Instruments at PD LINK technology?

Speaker 2

Thank you very much for the question, and I would be happy to to answer without drilling too much into technology because the answer is quite technique. And I will try to to leave it in a way which is not too technique. I hope I will succeed. Bandwidth is not only resolution. Bandwidth is also frames per second.

Speaker 2

It's also a peak at how many pixels, how many bytes per pixel, beats per pixel. All these together create the bandwidth. The higher the bandwidth, the more exposed it is to noise. And this is something which is quite not intuitive. When we move from a four gigabit bandwidth to eight gigabit bandwidth, we move to twice the bandwidth.

Speaker 2

But the fragility and the exposure to noise is not what it's not linear. It's far more. Meaning that if a car that is moving to a higher higher bandwidth will be driving near a cellular antenna on a bridge or near a a truck or whatever, the result can be lost frames. And lost frames meaning that missing the red light or missing the passenger or missing something. Now as the calculation of what the bandwidth is, whether it's eight eight megapixel camera or four megapixel camera, 30 or 60 or 24 frames per second or ten, twelve, 14, whatever number of bit pixel.

Speaker 2

Each of them has its calculation, and they yes. They can play with it. They can definitely decide to move one up and move one down in order to to to stay with lower bandwidth and use incumbent technology in order not to move to the next stage, and sometimes they do it. But there is a there is a level that they cannot do it anymore. And they understand it in order to move to the next stage of quality of the ADAS.

Speaker 2

It requires the next mode of the quality of information. It is retrieved in order to digest it and make a decision. Red light, yes or no? Passenger, yes or no? Biopically, yes or no?

Speaker 2

And sometimes, not sometimes, often, this requires only one way to do it to to know it is, enough information. Of course, the the other side is the quality of the of the mobile app, which is, of course, a supreme system that analyzes it. But, you know, you need a certain level of information to analyze. I want to go in something very detailed, if I may. Think about a car that is going and it has, the speed it is going, Breaking distance is 150 meters.

Speaker 2

But there is a very small foot of a child just out of the sidewalk in hundred meters. A certain resolution or certain bandwidth will not see the the the foot of the child, And this is exactly how to prevent casualty or accident by going upwards resolution. I hope I was not too technical, and I and and and I gave the answer.

Speaker 5

No. That was very helpful. Wanted to to follow-up. You mentioned the MIPI, AIFI interoperability testing in China and your work with the local partner. I guess two questions there.

Speaker 5

Can you give us some sense how those how you're progressing in terms of conversations with Chinese auto OEMs? When could you start to see adoption of your solution in the China market? And to the extent you're working with that local partner, does that have any impact on profitability or margins for your solutions since you're working with that partner on the go to market

Speaker 6

strategy?

Speaker 2

Yes. There are several sections in this question. I will try to not miss any of them. First, China become the a place of innovation. And we are very happy to see that innovation and AI goes together.

Speaker 2

There is no place that AI has been accepted in the market more than China, And we see so many EFI players, and we are helping interoperability to everyone. We're happy to bring competitors to

Operator

the market even if they eat part of our lunch.

Speaker 2

And we do it because at the end of the day, we have a superior technology and a lot of those chips would be acquired they purchased from us. So we help the ecosystem, and we're happy to see how the ecosystem is vibrant and how the ecosystem is active. So this is about EFI in China. About us in China. Yeah, we are China has often need requires different business models.

Speaker 2

Business businesses not models without getting too detailed, requires JVs and, and other, other, I would say, mechanics in order to penetrate to the market. And we have we adopt them. We don't try to to teach the Chinese the Israeli way, the opposite. We are trying to learn the Chinese way. And in and in order to penetrate the market, we understand that we need to do some adjustment.

Speaker 2

If we do those adjustment and then the last question is whether we speak to to OEMs. Of course, we do. You know that there are many, many OEMs in China. There are many mergers. There are there are many it's it's a lot of activities.

Speaker 2

And I believe that, we are very well aware and accepted in China as a superior technology. I believe that there is most of, if not all, of the of the Chinese manufacturer know about A5, and this is an option, know about Valensa, it's an option. And then we're working very hard in order to create news for for us and for the markets. Great. And then just last quick one

Speaker 5

for Guy. Guy, you guys gave 2025 guidance, I think, originally back at the Analyst Day late last year. I think you reiterated on your last conference call, I didn't see any comment about 2025 guidance. So not sure if you're willing to reiterate that this morning or whether you're pulling that guidance given some of the tariff uncertainty. But just any comment on the 2025 annual guidance?

Speaker 3

At this stage, we there is no change on the guidance. We keep them as as we said. And, yes, we're closely tracking the situation and the impact of the tariffs. And if there is any change, we will let you know. But at this stage, we keep everything as is.

Speaker 6

Perfect. Thank you.

Speaker 2

Thank you.

Operator

The next question is from Suji Desilva of Roth Capital. Please go ahead.

Speaker 6

Hi, Gideon. Hi, Guy. Congrats on the steady results here. Switching over to the CIB segment, as you talk about the mid-twenty six ramp of some of the newer products, can you talk about which end markets might lead that professional AV, industrial, machine vision, or medical? And then which products would lead the ramp?

Speaker 6

Was it is it VA seven thousand or VA sixty three twenty, or will it be both together?

Speaker 2

Okay. There are, you know, we're active in several markets in the CIB. There is a traditional pro AV, the market which suffered from a inventory digestion as we look that there is recovery in the market. There is the market which is it is somehow can be called ProAV, but it's in AV more than ProAV, which is the conference rooms, a market which we are helping to ramp it up. It needs definitely with the $63.20 and somehow with the 3,000.

Speaker 2

We are from the Versus family. And if we move moving to a to a USB three extension and to a extension of industrial camera, both the v s sixty three twenty, the the chip that was made for the audio video and the v 7,000 series for automotive, both of them find a way to extension and connecting cameras in the industrial world to the, computing power that that calculates and and and help monitoring the industrial process. So the answer is that in the industrial machine vision support, the chips from automotive and audio video, with very few changes and modification being found, the chips that are suitable for this market, which we're very happy about this reuse. Okay. All

Speaker 6

right. Thanks, Gideon. And the other question really is I'm sorry. Go ahead. On the financial model, given where do you think the breakeven revenue is kind of revisiting?

Speaker 6

We talked about the Analyst Day perhaps. And then what do you know the expected CIB auto mix would be at that point?

Speaker 2

Uh-huh. Well,

Operator

it's a question it's a question

Speaker 2

of thinking timing. We see the progress in all the three sections of US of CIB in automotive and audio video. Of course, automotive is everyone knows it's slowest in the market. We thought that CIB will be slower than AV. We're not sure it is.

Speaker 2

CIB, there is a lot of enthusiasm in the market, and we hope it is definitely faster than automotive. The question whether it's slower than audiovisual or not, we are in a stage of understanding it. I believe it is a lot closer in speed to audiovisual than to to automotive. So the mix of the three is very much dependent timing. I guess that when we would be at this breakeven point we spoke, it will be not a third, a third, and a third, but maybe not very far away from there.

Speaker 2

But it's very hard to give you an exact what would be the mix and and and what would be the mix in this time. Probably Guy should elaborate here more than I do. Thank you, Guido.

Speaker 3

Hi, Suji. So I will give you again the data we provided during the Analyst Day. So first of all, we expect to be EBITDA positive at annual run rate of revenue of $120,000,000 roughly a year. We did not say when we expect it to happen. We said about the guidance for 2025.

Speaker 3

And we said where is our goal for 2029, which is anywhere between $220,000,000 to $300,000,000 by 2029. The second element, we said what are the expectations on 2029 of the allocations. And we said that we expect to have the CAB anywhere between 90,000,000 to $100,000,000 of revenue. And we expect to see on automotive, 65,000,000 to $110,000,000 and machine vision industrial, 35 to $50 and for potential acquisitions, 30,000,000 to $40,000,000 altogether, $220,000,000 to $300,000,000 of revenue by this year. We did not say or mention anything about the allocation of the different verticals or segments in the breakeven point, in the EBITDA positive point.

Speaker 3

Because first of all, we have still limited visibility to answer this question, but we I can say the following. We said that we expect initial ramp up from the from the CIB business starting from 2025 and beyond, machine vision and industrial from 2026 and beyond, and ramping up of the revenue in the automotive from '27 late twenty six, '20 '7 and beyond. I think that these are the inputs we gave during the Analyst Day. I think that that probably can help you do the calculation on the question the specific question you have asked.

Speaker 6

Okay. Thanks. Very helpful, Gideon. Thanks.

Speaker 3

Thank you.

Operator

The next question is from Robert Lynch of Stonegate Capital Partners. Please go ahead.

Speaker 7

Hi, Gideon. Hi, Guy. This is Robert Lynch on for Dave Storms. I just have a couple of questions here. The first one is just around margins, and I apologize if this is repetitive.

Speaker 7

Automotive gross margins improved significantly in Q1 '40 '8 point '4 percent from 29.1% just a year ago. Can you provide more detail on what drove this improvement? I understand it came from optimization of product cost, but if you could just provide more color on what specific initiatives allowed for decreasing cost? And do you find these margin levels to be sustainable going

Speaker 3

forward So unfortunately, don't have too much to say about what we said. On we we do have ongoing efforts to improve the cost of manufacturing, and we do different type of things all the time. Specifically in Q4, we had some inventory adjustment we said, and Q1 we did not. But I would call it kind of ongoing efforts and routine activities in order to improve the margin all the time. In addition, typically, we have also the element of the product mix, which also has some impact on the gross margin.

Speaker 3

So these are the typical elements that influence the gross margin in the company.

Speaker 7

Okay. Understood. I really appreciate the color there. And just had one more around working capital. Given the slight volatility here in the on the in the supply chain, excuse me, how are you approaching working capital management to balance inventory levels as well as liquidity and and the flexibility needed to meet customer demand amid these macro headwinds?

Speaker 7

Anything anything there?

Speaker 2

Well, to pass off the question, I'll take the first one. Because of Alenance's very strong balance sheet, our policy is zero risk in being a very good supplier to our customer. And then because we know the digestion now is very stable, we rather have a bigger buffer and continue to be a company that each of our customers will will complement us and and and and this is part of the company's pride. And I I think this is one of the better use of of of of capital, and this is the part of the question. I guess, Guy would take the second part.

Speaker 3

So I think that, eventually, lead times got back to normal levels of the pre COVID, and that means both the lead time that Valens provides to its customers and the same and the opposite Valens gets from its suppliers. So we're trying to manage the inventory in a most efficient way that we could, adjusting the lead time and and keeping some buffers in order to make sure that we can always supply on time. And this is the way we maintain the inventory.

Speaker 7

Okay. Great. Thank you, Gideon. Thank you, Guy. That's all for me.

Speaker 7

Congrats on Q1, and good luck in Q2.

Speaker 2

Thank you. Thank you.

Operator

There are no further questions at this time. Mr. Bensvi, would you like to make your concluding statement?

Speaker 2

Yes, please. Thank you. I would like to thank you all for joining us for the questions and for the discussion and joining us today for our first quarter twenty twenty five earnings call and for your continued support and interest in Valens Semiconductor. Hope to meet you again in our next earnings call, and thank you, and goodbye.

Operator

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

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Key Takeaways

  • Valens delivered Q1 revenue of $16.8 million, exceeding guidance, with GAAP gross margin at 62.9% and an adjusted EBITDA loss of $4.3 million within forecast.
  • The Cross-Industry Business unit is rebounding from ProAV inventory digestion, gaining traction with over 70 products using the VS6320 chipset and earning awards at ICE and Infocom China.
  • Automotive momentum continues as the VB7000 chipset for MIPI A5 won a Mobileye-Mobilize design win, passed interoperability tests with seven A5 vendors, and secured a China localization partnership.
  • Valens ended Q1 with $112.5 million in cash, no debt, repurchased $9.6 million of shares, and reaffirmed its full-year 2025 guidance despite tariff uncertainty.
A.I. generated. May contain errors.
Earnings Conference Call
Valens Semiconductor Q1 2025
00:00 / 00:00