Valens Semiconductor Ltd. Q1 FY2025 earnings call

• Valens started 2025 on a high note with revenues exceeding guidance. GAAP gross margin was 62.9% above guidance, and adjusted EBITDA loss was within the range.
• In the Cross-Industry Business unit, Pro AV is emerging from inventory cycle bottom, with solutions being integrated into products launching mid-2026. Showcased at ISE and InfoComm China, winning awards. Machine vision segment saw positive customer feedback at Embedded World, with partnerships like RGo Robotics and CHERRY, and A-PHY based solution progress.
• In Automotive, Mobileye selected Valens chips for in-car sensor to compute connectivity, and successful interoperability with 7 A-PHY silicon vendors. Growth in MIPI A-PHY in China with partnership with ESWIN Computing and display at Auto Shanghai.

In the first quarter of 2025, Valens Semiconductor reported total revenues of $16.8 million. The Cross-Industry Business (CIB) segment contributed $11.7 million, which is approximately 70% of the total revenue, with a gross margin of 69.1%. The Automotive segment contributed $5.1 million, accounting for about 30% of total revenue, and had a gross margin of 48.4%. GAAP gross margin for the quarter was 62.9%, and adjusted EBITDA loss was $4.3 million, which was within the guidance range.

• Q2 2025 revenue expected to be in the range of $16.5 million to $16.8 million.
• Q2 2025 gross margin expected to be in the range of 63% to 64%.
• Q2 2025 adjusted EBITDA loss expected to be in the range of $4.9 million to $4.4 million.
• No change to 2025 annual guidance at this stage, with monitoring of tariffs ongoing.

• Semiconductors currently exempt from tariffs, but monitoring of indirect impacts on operations and customer end-market demand is ongoing. No direct impact visible at present.

Q: 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 A-PHY? Since Mobileye is already collaborating across several OEMs, does that by virtue mean you will be working closely with those OEMs?

A: Hi, Rick. Thank you for your question and I’m happy to answer about – actually, it’s 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 of Mobileye, a need that, of course, is more resolution, as more bandwidth more exposed to a noise that can ruin the whole system. And we proved that by this elevation and 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 is other deals, it’s time to tell, 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 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 I have said 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.

Q: Hey guys. Let me offer my congratulations on the 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 solution or customers to adopt your solution. Can you give us a sense, is there a camera resolution where the incumbent technology that Mobileye uses with a large semiconductor competitor maxes out? Like, are we talking 8 megapixel resolutions? Does it have to be something higher? Just any kind of metrics around the resolution where the MIPI A-PHY standard may really start to show dramatic benefits relative to the Texas Instruments FPD-Link technology?

A: Thank you very much for the question, and I would be happy to answer without drilling too much into technology because the answer is quite technique, and I will try 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. It’s also how many pixels, how many bites per pixel, bits per pixel, all of these together create the bandwidth. The higher the bandwidth, the more exposed is to noise. And this is something which is quite not intuitive. When we move from a 4-gigabit bandwidth to 8-gigabit bandwidth, we move to twice the bandwidth. But the fragility and the exposure to noise is not wise. It’s not linear. It’s far more, meaning that if a car that is moving to a higher bandwidth will be driving near a cellular antenna on a bridge or near 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 8 megapixel camera or 4 megapixel camera, 30 or 60 or 24 frames per second or 10, 12, 14 or whatever number of pixel. Each of them has its calculation. And yes, they can play with it. They can definitely decide to move one up and one down in order to stay with lower bandwidth and use the incumbent technology in order not to move to the next stage and sometimes they do it. But there is a level that they cannot do it anymore. And they understand that in order to move to the next stage of quality of the ADAS, 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, bicycles, yes or no, and sometimes – not sometimes, often, this requires only one way to know it is enough information. Of course, the other side is the quality of the Mobileye, which is of course, a supreme system that analyzes it, but you need a certain level of information to analyze.

Q: Hi Gideon. Hi Guy. Congrats on the steady results here. Switching over to the CIB segment, as you talk about the mid-‘26 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? Was it – is it VA7000 or VS6320 or will it be both together?

A: Okay. There are – we are active in several markets in the CIB. There is traditional Pro AV, the market which suffered from inventory digestion, and we look that there is recovery in the market. There is a market which is – it is somehow can be called Pro AV, but it’s in AV more than Pro AV, which is the conference rooms, a market which we are helping to ramp it up. It needs definitely with the 6320 and somehow with the 3000, we are from the VS family. And if we are moving to a USB 3 extension and to an extension of industrial camera, both the VS6320, the chip that was made for the audio-video and the VA7000 series for automotive, both of them find a way to extension and connecting cameras in the industrial world to the computing power that calculates and help monitoring the industrial process. So, the answer is that in the industrial machine vision support both the chips from automotive and audio-video with very few changes in notification being found the chips that are suitable for this market, which we are very happy about this reuse.

Q: 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. Automotive gross margins improved significantly in Q1 to 48.4% 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 a decrease in costs? And do you find these margin levels to be sustainable, going forward here?

A: So unfortunately, I don’t have too much to say above what we said. We do 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 adjustments we said in 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. So, these are the typical elements that influence the gross margin of the company.

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

A: Well, there are two parts of the question. I will take the first one. Because of Valens’s very strong balance sheet, our policy is zero risk in being a very good supplier to our customer. And 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 complement us, and this is part of the company’s pride. And I think this is one of the better use of capital and this is the part of the question. I guess Guy would take the second part. Guy Nathanzon: So, I think that eventually, lead time got back to normal levels of the pre-COVID. And that means both lead time that Valens provides to its customers and the same – and the opposite Valens gets from its suppliers. So, we are trying to manage the inventory in the most efficient way that we could, adjusting the lead time and keeping some buffers in order to make sure that we can always supply on time. And this is the way we maintain the inventories.