Valens Semiconductor Ltd. Q3 FY2024 earnings call

• Third quarter results were solid with revenues exceeding guidance. Achieved three new automotive design wins with leading European OEMs and entered the industrial machine vision market.
• VS6320 chipset in audio video applications attracted over 50 customers and expected to contribute to many product launches in the next 9-12 months.
• Showcased innovative solutions at VISION trade show in Stuttgart, receiving positive feedback for products like VA7000-CSI2 extension and VS6320 USB3 extension solution.
• Announced release of USB3 industrial grade extender product based on VS6320 chipset. Engaged with leading camera module manufacturers in industrial machine vision.
• Audio Video Business transitioning to Cross Industry Business including verticals like industrial, machine vision, and medical. Gabi Shriki stepping down as Head of Audio Video Business, Adar Segal to assume Head of Automotive Business effective January 1, 2025.
• MIPI A-PHY standard gaining wider adoption, with Continental introducing an 8-megapixel camera using MIPI A-PHY connectivity.

Valens Semiconductor reported third quarter 2024 revenues of $16 million, which exceeded the top end of guidance. The Audio-Video segment including Acroname contributed $9.4 million, approximately 60% of total revenue. The Automotive segment contributed $6.6 million, approximately 40% of total revenue. GAAP gross margin for the third quarter was 56.4%. Audio-video gross margin was 70.2% and automotive gross margin was 37%. Non-GAAP gross margin was 60.7%. Operating expenses in the third quarter totaled $21.3 million. GAAP net loss was $10.4 million. Adjusted EBITDA in the third quarter was a loss of $5.1 million.

• Fourth quarter revenue expected to be in the range of $16 million to $16.3 million.
• Fourth quarter gross margin expected to be in the range of 58% to 62% and adjusted EBITDA loss expected to be in the range of $4.9 million to $4 million.
• Full year 2024 revenue expected to be in the range of $57.2 million to $57.5 million, gross margins in the range of 58% to 60%, and adjusted EBITDA loss expected to be in the range of $22.3 million to $21.4 million.

• Inventory digestion continues to impact the industry, although Valens believes it is emerging from the bottom of the cycle.
• In the automotive industry, OEMs often avoid revealing technology inside their cars until production start, making it challenging to disclose specific details of new design wins.

Q: Suji Desilva asked about visibility with inventories being worked down and if they can shift to demand to consumption again starting in 2025.

A: Gideon Ben-Zvi said visibility is improving as sales cycle is shrunk and time to order chips is better than in the past.

Q: Suji Desilva inquired about the Acroname acquisition integration and end market traction.

A: Gideon Ben-Zvi stated Acroname sales are different from semiconductor industry, with ad hoc sales and a transparent due diligence.

Q: Suji Desilva asked about the automotive OEM wins being for EV only.

A: Gideon Ben-Zvi said EV is not distinguished for them as ADAS is the same for EV and non-EV cars.

Q: Suji Desilva asked about gross margin trend into 2025.

A: Guy Nathanzon said gross margin is impacted by the ratio between audio-video and automotive revenue and the level of revenue due to fixed costs.

Q: Kevin Cassidy asked if there were any 10% plus customers during the quarter.

A: Guy Nathanzon said no.

Q: Kevin Cassidy asked about the design pipeline and if there would be a leading customer.

A: Gideon Ben-Zvi said there is no risk of being dependent on a single customer in the coming years as both automotive and audio video customers have different characteristics.

Q: Dustin Fowler asked about Stoneridge's progress.

A: Gideon Ben-Zvi said Stoneridge had a successful pilot and the truck industry will reward them, with details to be discussed at Investor Day next week.