Valens Semiconductor Reports Second Quarter 2023 Results

Delivered Record Quarterly Revenue and Implemented a Plan to Improve Efficiency

HOD HASHARON, Israel, Aug. 9, 2023 /PRNewswire/ -- Valens Semiconductor Ltd. (NYSE: VLN), a premier provider of high-performance connectivity solutions for the audio-video and automotive markets, today reported financial results for the quarter ended June 30, 2023.

"Valens Semiconductor revenues reached a record of $24.2 million dollars in the second quarter of 2023, and we also achieved better than anticipated profitability metrics. During the second quarter we executed a plan to improve the company's efficiency by streamlining our development platforms," said Gideon Ben-Zvi, CEO of Valens Semiconductor.

"Our automotive business continued to grow, as our VA6000 chipset is now broadly deployed in a range of Mercedes-Benz car models, including Electric Vehicles (EV). We continue to see a growing demand from automotive OEMs for ADAS, including vision-based systems for applications such as surround-view, parking assist, and reverse assist. Our VA7000 chipset family is a perfect fit for vision-based systems and in Q2, we grew the bid pipeline with automotive OEMs considering the deployment of the VA7000 in mass production. We remain on track to announce first design wins this year. In the audio-video segment, we expect to ship engineering samples of the VS6320, the first single-chip in market for extension of high-performance USB, to select customers in the fourth quarter of this year. Based on the tone and pace of conversations with prospective customers, we believe new products from these customers embedding the VS6320 for videoconferencing, industrial and medical applications will be launched during the second half of 2024.

"At Valens Semiconductor, we continue to make progress executing against our long-term growth opportunities, as we further push the boundaries of connectivity with our advanced offerings and enable our customers to bring to market new disruptive products to existing and untapped markets. Our strong balance sheet provides the foundation for us to execute our long-term growth strategy and pursue the promising opportunities that will deliver value for all our stakeholders," concluded Ben-Zvi.

Key Financial and Business Highlights

• Record quarterly revenues. Second quarter revenues reached $24.2 million, up 7.5% from the second quarter of 2022, and up 1.2% from the first quarter of 2023
  - GAAP gross margin was 61.8% for the second quarter 2023 (non-GAAP gross margin was 63.1%)
  - Q2 2023 GAAP Net Loss was $(4.6) million, compared to $(10.0) million in Q2 2022, and Adjusted EBITDA Loss in Q2 2023 was $(0.8) million, compared to $(4.5) million in Q2 2022
• Strong balance sheet as of June 30, 2023. Working capital of $160.8 million, including $138.0 million in cash, cash equivalents and short-term deposits, and no debt
• Inventory balance was substantially lower than at the end of the prior quarter, reaching $19.0 million at the end of June 2023, down from $23.6 million dollars at the end of March 2023
• Implemented a plan to improve efficiency, which is expected to save approximately $9 million on an annual basis
• Leveraged the Company's disruptive connectivity offerings across both business segments – audio-video and automotive
  – Audio-video: Progress with the new VS6320 chipset towards shipment to select customers in the fourth quarter, and announced a collaboration with Taiwan-based iCatch Technology, a leading Artificial Intelligence (AI) image processing company , to develop a high performance, low cost, low power multi-camera videoconferencing solution embedding the VA7000, in line with the company's long-term vision to accelerate the transformation of the videoconferencing market with an extensive product portfolio
  – Automotive: Expanded the bid pipeline for the VA7000 and continue to progress with several automotive OEM bids for the VA7000, with first design wins expected this year

Financial Outlook

Disclaimer: Valens Semiconductor does not provide GAAP net profit (loss) guidance as certain elements of net profit (loss), including share-based compensation expenses and warrant valuations, are not predictable due to the high variability and difficulty of making accurate forecasts. Adjusted EBITDA is a non-GAAP measure. See the tables below for additional information regarding this and other non-GAAP metrics used in this release.

"We exceeded the high end of our revenue and Adjusted EBITDA guidance for Q2 2023," said Dror Heldenberg, CFO of Valens Semiconductor. "For the first time, we also generated cash from operations. We ended the quarter with a solid balance sheet of $138 million in cash, which provides us operational flexibility to grow our business."

"For the third quarter 2023, the company is reaffirming its revenues guidance at the range between $14.0 million and $14.2 million. The Company is also providing gross margin guidance, which is expected to range between 57.6% and 58.0% and Adjusted EBITDA loss which is expected to be in the range of $(12.2) million to $(11.9) million.

"For the full year 2023, the company is reaffirming its revenue guidance and improving its Adjusted EBITDA guidance. Revenues are expected to range between $83.8 million and $84.2 million, of which automotive revenues are expected to approximate 30%. Gross margin for the full year 2023 is now expected to range between 62.2% and 62.5%. Adjusted EBITDA loss in 2023 is now expected to be in the range of $(16.2) million to $(15.6) million. We remain on track to achieve Adjusted EBITDA breakeven by the end of 2023 and expect the Company to be cash-flow positive in 2024."

Below is a table summarizing our updated guidance for the full year 2023:

Conference Call Information

Valens Semiconductor will host a conference call today, Wednesday, August 9, 2023, at 8:30 a.m. Eastern Time (ET) to discuss its second quarter 2023 financial results and business outlook. To access this call, dial (at least 10 minutes before the scheduled time) +1 (888) 642-5032 (U.S.), 0 (800) 917-5108 (UK), 03 918 0609 (Israel) or +972 3 918 0609 (all other locations).

A live webcast of the conference call will be available via the investor relations section of Valens Semiconductor's website at Valens - Financials - Quarterly Results. The live webcast can also be accessed by clicking here. A replay of the conference call will be available on Valens Semiconductor's website shortly after the call concludes.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "estimate," "plan," "project," "forecast," "intend," "will," "expect," "anticipate," "believe," "seek," "target" or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding our anticipated future results, including financial results, currency exchange rates, and contract wins, and future economic and market conditions. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of Valens Semiconductor's ("Valens") management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Valens Semiconductor.

These forward-looking statements are subject to a number of risks and uncertainties, including the cyclicality of the semiconductor industry; the effect of inflation and a rising interest rate environment on our customers and industry; the ability of our customers to absorb inventory; the effects of health epidemics, such as the recent global COVID-19 pandemic; the impact of the global pandemic caused by COVID-19 on our customers' budgets and on economic conditions generally, as well as the length, severity of and pace of recovery following the pandemic; competition in the semiconductor industry, and the failure to introduce new technologies and products in a timely manner to compete successfully against competitors; if Valens fails to adjust its supply chain volume due to changing market conditions or fails to estimate its customers' demand; disruptions in relationships with any one of Valens' key customers; any difficulty selling Valens' products if customers do not design its products into their product offerings; Valens' dependence on winning selection processes; even if Valens succeeds in winning selection processes for its products, Valens may not generate timely or sufficient net sales or margins from those wins; sustained yield problems or other delays in the manufacturing process of products; our ability to effectively manage, invest in, grow, and retain our sales force, research and development capabilities, marketing team and other key personnel; our ability to timely adjust product prices to customers following price increase by the supply chain; our ability to adjust our inventory level due to reduction in demand due to inventory buffers accrued by customers; our expectations regarding the outcome of any future litigation in which we are named as a party; our ability to adequately protect and defend our intellectual property and other proprietary rights; the market price and trading volume of the Valens ordinary shares may be volatile and could decline significantly; political, economic, governmental and tax consequences associated with our incorporation and location in Israel; and those factors discussed in Valens' Form 20-F filed with the SEC on March 1, 2023 under the heading "Risk Factors," and other documents of Valens filed, or to be filed, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Valens does not presently know or that Valens currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Valens' expectations, plans or forecasts of future events and views as of the date of this press release. Valens anticipates that subsequent events and developments may cause Valens' assessments to change. However, while Valens may elect to update these forward-looking statements at some point in the future, Valens specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Valens' assessment as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

About Valens Semiconductor

Valens Semiconductor pushes the boundaries of connectivity by enabling long-reach, high-performance video and data transmission for the Audio-Video and Automotive industries. Valens' HDBaseT® technology is the leading standard in the Audio-Video market with tens of millions of Valens' chipsets integrated into thousands of products in a wide range of applications. Valens Semiconductor's Automotive chipsets are deployed in systems manufactured by leading customers and are on the road in vehicles around the world. Valens is a key enabler of the evolution of ADAS and autonomous driving and its advanced technology is the basis for the MIPI A-PHY industry standard for high-speed in-vehicle connectivity. For more information, visit https://www.valens.com/.

^[7] As of January 1, 2022, the company has implemented the FASB ASU No. 2016-02, Leases (ASC 842), on the recognition, measurement, presentation, and disclosure of leases

^[8] As of June 30, 2023, and December 31, 2022, include $1,857 thousand and $1,811 thousand, respectively, of current maturities of operating leases liabilities; see footnote 7.

^[9] See footnote 7.