Earnings call transcript: Valens Q4 2024 sees revenue growth, stock up

Valens Semiconductor reported a mixed financial performance in Q4 2024, with revenue surpassing forecasts but earnings per share (EPS) falling slightly short of expectations. The company posted a revenue of $16.7 million, exceeding the forecast of $15.65 million, while EPS came in at -$0.07, missing the forecast of -$0.06. According to InvestingPro, the company maintains a strong balance sheet with more cash than debt and a healthy current ratio of 8.2. Following the earnings release, Valens’ stock rose 6.7% in pre-market trading, reflecting investor optimism about the company’s growth prospects.

Key Takeaways

• Valens achieved its fourth consecutive quarter of revenue growth.
• The Cross Industry Business (CIB) accounted for 70% of Q4 revenue.
• The company launched the VS6320 chipset, enhancing its product lineup.
• Operating expenses were reduced, contributing to improved financial health.
• The stock price increased by 6.7% in pre-market trading.

Company Performance

Valens demonstrated resilience in Q4 2024, continuing its trend of revenue growth despite a challenging market environment. The company’s revenue for the full year reached $57.9 million, driven by strong performance in its Cross Industry Business and automotive sectors. The launch of the VS6320 chipset and strategic acquisitions, such as Acronym, bolstered its market position.

Financial Highlights

• Q4 Revenue: $16.7 million (exceeding guidance).
• Full Year Revenue: $57.9 million.
• Q4 Gross Margin: 60.4%.
• Full Year GAAP Net Loss: $36.6 million.
• Cash and Cash Equivalents: $131 million.

Earnings vs. Forecast

Valens reported an EPS of -$0.07, missing the forecast of -$0.06 by approximately 16.7%. However, the revenue of $16.7 million exceeded expectations by 6.7%, marking a positive surprise in terms of sales performance.

Market Reaction

Following the earnings announcement, Valens’ stock rose by 6.7% in pre-market trading, reaching $2.38. While the stock has faced challenges with a 13.2% decline over the past week according to InvestingPro data, the positive market reaction was likely driven by the company’s revenue beat and strong guidance for 2025, with revenue expected to grow between 23% and 31% year-over-year. InvestingPro analysis suggests the stock is currently fairly valued, with analysts setting price targets between $3 and $5.

Outlook & Guidance

Looking ahead, Valens provided robust guidance for 2025, projecting revenue between $71 million and $76 million. The company aims to capitalize on growing markets such as video conferencing, industrial machine vision, and automotive, with long-term revenue targets of $220 million to $300 million by 2029.

Executive Commentary

Gideon Bensvi, CEO, stated, "2024 was a challenging year... we believe that we are emerging from the bottom of the cycle." CFO Guy Nathanson added, "We are targeting that by 2029 our revenue will be in the range of $220M to $300M," highlighting the company’s ambitious growth plans.

Risks and Challenges

• Supply chain disruptions could impact production schedules.
• Market saturation in key segments may limit growth potential.
• Macro-economic pressures could affect consumer spending and investment.
• Technological advancements by competitors could pose a threat.
• Dependence on a few large customers may increase financial risk.

Q&A

During the earnings call, analysts inquired about Valens’ market recovery strategies and new market segments. The company expressed confidence in its ability to capture emerging opportunities in conference room connectivity and anticipated automotive design wins by the end of 2026.

Full transcript - Valens (VLN) Q4 2024:

Conference 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 Valence Semiconductor’s fourth quarter and full year twenty twenty four earnings conference call and webcast. All participant lines have been placed in a listen only mode. Opening remarks by Valence Semiconductor management will be followed by a question and answer session.

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

Michal Benari, Investor Relations, Valens Semiconductor: Thank you, and welcome everyone to Valence Semiconductor’s fourth quarter twenty twenty four and full year earnings call. With me today are Gideon Bensvi, Chief Executive Officer and Guy Nathanson, Chief Financial Officer. Earlier today, we issued a press release that is available on the Investor Relations section of our website under investors.valance.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.

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 reconciliation of these metrics within our earnings release. With that, I will now turn the call over to Gideon.

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Thank you, Michal. Hello, everyone, and

Guy Nathanson, Chief Financial Officer, Valens Semiconductor: thank you for joining us. 2024 was

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: a challenging year for many companies around the world, including semiconductor companies in many markets and these challenges affected Valez as well. However, although our sales were slowed by continued inventory digestion and weakness in our customer markets, we believe that we are emerging from the bottom of the cycle and the 2025 will prove a turnaround year for our company. I want to start by giving you some highlights for 2024. First, we announced three design wins in the automotive industry for ADAS platforms. Second, we successfully completed our first acquisition’s acronym, which will enable Valens to expand its position in the industrial market with a holistic USB focused offering.

Third, we released the VS6320 chipset, the first ASIC based USB 3.2 high performance extension solution on the market. Fourth, we defined a goal to penetrate a new market that has high growth potential, industrial machine vision, and established specific cooperation with companies in this space. Sixth, we announced an ambitious five year plan that if achieved could see us more than quadruple our top line revenues over the coming years. As part of the five year plan, we reorganized our corporate structure in order to maximize our ability to reach new high growth potential markets. Over the next few minutes, I will walk you through the details of this plan and explain why I expect that we will achieve our goals.

But before I do, I want to provide a quick overview of our fourth quarter financial performance. We reported revenues of 16,700,000 which exceeded the top end of our guidance. GAAP gross margin for the fourth quarter came in at 60.4% above the midpoint of the guidance and adjusted EBITDA loss was $3,700,000 better than the guidance range. Importantly, we have a robust balance sheet of $131,000,000 of cash and cash equivalents. Now, let’s turn to the five year plan and I’ll start with the Cross Industry Business Unit or CIB and I’ll bring down into the various sub verticals included within it, first and foremost, the professional audio video vertical.

This is the bread and butter of the lens. It’s where we got our start all those years ago with the HDPC standards and to this day, it accounts for the bulk of our revenues. We have set clear goals for ProAV. As part of our five year plan, we share that the video conferencing vertical alone represents a large opportunity for the company, which we estimate will signify a top of $350,000,000 by 2029. Although this market is currently addressed by our legacy HDVC solutions, we believe that there are significant additional growth opportunities here fueled by a variety of market dynamics including increased demand for video and video peripherals inside meeting rooms as well as the growing popularity of USB as the interface of choice for meeting rooms.

We’re well positioned to capitalize on this trend with our newest chipset the VS6320 which we believe is the most reliable and cost efficient extension solution for USB 3.2 on the market today. Last quarter inventory digestion continued to impact our Pro EV sales. However, we believe we are emerging from the bottom of the cycle. As such, we’re seeing increasing interest in our solutions, which are set to be integrated into products that are expected to hit the market in the next few years. We are thrilled with the positive market feedback following the launch of the latest chipsets.

This was most recently evident at ISE, the industry’s mostly known international conference for innovation in video conferencing, education, digital signage, entertainment and more. There we showcased a variety of meeting room setups enabled by two of our newest chipsets, the VS6320 and the V7000 and we announced that our solutions are powering the latest generation of products for some of Pro AV largest manufacturers. For example, we recently announced that our technology for the extension of USB and power was officially endorsed by audio video leader Sennheiser and that our solution can be used to extend the company’s popular Team Connect Bar product line. In addition, we demonstrated that Valens cutting edge chipsets can power Logitech (NASDAQ:LOGI)’s innovative rally camera streamline kits and Logitech’s Xpenn product, which enables unmatched flexibility for advanced video conferencing and hybrid learning applications. Both of these products illustrate how our chipsets can capitalize on important trends we see planned out within the video conferencing space.

More conference rooms of all sizes from small hotel rooms to large corporate conference rooms, more displays, more cameras, more video bars, all of which are opportunities for Valens to broaden its presence in this market. I would like to remind you that our technology is already embedded within all major project offerings including Exxon (NYSE:XOM), Panasonic (OTC:PCRFY) and NEC Sharp (OTC:SHCAY) and it is the extension solution of choice for all major audio video distribution equipment companies such as Crestron, Exxon, Atlona and Kremer. We are the de facto providers of comprehensive meeting room connectivity solutions. We estimate that in 2025, we will return to growth given the following factors. Our customers are entering 2025 with much healthier inventory levels and they report increased activity with more new bids and installations in their end markets.

Same with the cross industry business unit, we are going to move to a new high gross market industrial machine vision and medical endoscopes. We are long been active in industrial and medical offering IPC connectivity in the former and medical imaging connectivity in the latter. Additionally, as outlined in our five year plan, we believe the industrial machine vision and medical endoscopy vertical represents new and exciting opportunity with high potential upside. In the industrial machine vision vertical, we are heavily promoting our VS6320 and VA7000 chipsets, which extend the commonly used USB 3.2 and CSI two interfaces respectively. We are actively engaged with leading camera module manufacturers including Teledyne, E2V, Framos, Leofan Imaging and D3 Embedded among others and these collaborations are developing quickly.

For example, in Q4, D3 officially began selling camera modules based on the VA7000 A5 chipset offering half a dozen A5 models. We will be showcasing these chipsets among others at the Embedded World Conference taking place in November next month. There is really no substitute for seeing live demonstrations of our chipsets and this premier machine vision event will be an excellent opportunity to further broaden our customer base. In total, our five year plan anticipated our potential TAM for the industrial machine vision vertical can reach $460,000,000 by 2029 and I believe that we are well positioned to capture a significant share of this market. Our goal for 2025 is to achieve new design wins based on our advanced chipset with expected commercialization starting from 2026 and beyond.

A couple of words about Acronym, the company we acquired in May 2024, we believe that Acronym has the potential to expand our position in the professional audiovideo and industrial markets. Just last month, Acronym announced a new product based on the Valence VS6320 for point to point USB three and USB two switch extension with advanced power delivery. The product allows AV installers and OEM product manufacturers to control, manage and extend USB devices, streamlining product deployment for the machine vision, corporate and education industries. This is the result of significant synergies between Valens and Acroname and is precisely what we envisioned when we purchased Acroname. Rounding out the cross industry business unit, our five year plan envisions that our medical vertical could provide long term potential upside as our BS7000 chipset find use in endoscopes.

I’m talking about more reliable, uncompressed video with higher resolutions suitable for computer aided detection and AI applications. We have a variety of projects with companies in this space, some in the stage of preparing for clinical trials while others are readying to seek FDA approval. To be clear, this is currently a small market and our solutions are only now starting to gain traction. However, in the long term, we are excited about how this vertical could evolve. I would like to turn now to the automotive industry.

Our five year plan clearly highlights this industry as a key component in our long term vision. This is a vast long term opportunity with an estimated TAM of $4,500,000,000 per year by 2029 with significant upside during the following years. One, there is wide market adoption of sophisticated data systems. And once again, I am confident that we will capture a significant share of this market primarily through our flagship automotive chipset, the VA7000, which is the first to comply with the meet the A5 standard for high speed sensor connectivity. My confidence was bolstered during 2024 when we achieved three designs with leading European OEMs for the VA7000.

As you know, our ability to meet our ambitious five year targets in automotive depends on how quickly the MiP EFI standard takes hold within the industry and these design wins provide a strong foothold for Eify within the OEM community. We are eager to build of these wins to promote Eify across the industry and we will use the validation we received from these OEMs as a springboard to convince other of the superiority of the technology. We are currently in the midst of several evaluation processes at various stages with multiple OEMs. I would like to highlight one particular evaluation process we are undergoing with top five global OEM. This OEM recently benchmarked our BH7000 A5 compliant chipset against competing solutions.

As a result of intensive testing, which took place over the span of months, our technology won by knockout and was found far superior across the majority of testing parameters including resilience to EMC (NYSE:EMC_old), satellite reception, noise injection, latency and more. We believe that this testing gives our solution a significant competitive edge. Our goal in automotive for 2025 is to achieve new design wins based on VA7000 chipset with leading OEMs with expected commercialization within a few years. As you may recall, our third generation of automotive chipsets, the VA6000, has been in mass production since 2021 in Mercedes Benz (ETR:MBGn). This contract has generated $21,600,000 of revenues during 2024 and we expect it to account for most of our automotive revenues during 2025 as well.

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

Guy Nathanson, Chief Financial Officer, Valens Semiconductor: Let me start with our fourth quarter and full year 2024 results and then I’ll provide our outlook for the first quarter of twenty twenty five. We achieved quarterly revenue of $16,700,000 the fourth consecutive quarter of revenue growth, which exceeded our guidance of between $16,000,000 to $16,300,000 This compares to revenue of $16,000,000 in Q3 twenty twenty four and $21,900,000 in Q4 twenty twenty three. The Cross Industry business or CIB accounted for $11,700,000 or approximately 70% of total revenue, while automotive contributed $5,000,000 or approximately 30% of total revenue this quarter. This compares to Q3 twenty twenty four revenue of $9,400,000 from CIB and $6,600,000 from automotive which represented 6040% of total revenue respectively. It also compares to Q4 twenty twenty three revenue of $15,800,000 from the CIB and $6,100,000 from automotive representing 7030% of total revenue respectively.

Q4 twenty twenty four gross margin was 60.4% compared to our guidance of between 5862%. This compares to a Q3 twenty twenty four gross margin of 56.4% and Q4 twenty twenty three of 61.7%. On a segment basis, Q4 gross margin from the gross industry business was 64.7% and gross margin from automotive was 50.5. This compares to a Q3 twenty twenty four gross margin of 70.237% respectively and Q4 twenty twenty three gross margin of 76.622.6% respectively. The increase in Q4 automotive gross margin was due to an optimization of our product costs.

The decrease in gross margin of the cross industry business CAB was due to a product mix shift and lower fixed cost absorption. Non GAAP gross margin in Q4 was 64.5% which compares to 60.7 in Q3 twenty twenty four and sixty three point one percent in Q4 twenty twenty three. Operating expense in Q4 twenty twenty four totaled $18,500,000 compared to $21,300,000 at the end of Q3 twenty twenty four and to $15,300,000 in Q4 twenty twenty three. Research and development expense in Q4 totaled $10,100,000 compared to $10,300,000 in Q3 twenty twenty four and $8,600,000 in Q4 twenty twenty three. The increase compared to Q4 twenty twenty three is mainly due to payroll related expenses of Acronym’s workforce in the amount of $900,000 SG and A expenses in Q4 were $8,300,000 compared to $10,700,000 in Q3 twenty twenty four and $6,600,000 in Q4 twenty twenty three.

The quarterly decrease was mainly driven by $2,200,000 expense resulting from a certain batch production incident expense recorded in Q3 twenty twenty four. GAAP net loss in Q4 was $7,300,000 compared to a net loss of $10,400,000 in Q3 twenty twenty four and a net profit of $2,800,000 in Q4 twenty twenty three. Adjusted EBITDA in Q4 was a loss of $3,700,000 lower than the guidance range of loss between $4,900,000 and $4,000,000 This compares to an adjusted EBITDA loss of $5,100,000 in Q3 twenty twenty four and an adjusted EBITDA profit of $2,200,000 in Q4 twenty twenty three. GAAP loss per share in Q4 was $0.07 compared to a GAAP loss per share of $0.1 for Q3 twenty twenty four and a GAAP profit per share of $0.03 for Q4 twenty twenty three. Non GAAP loss per share in Q4 twenty twenty four was $0.02 compared to a loss per share of $0.03 in Q3 twenty twenty four and a profit per share of $0.06 in Q4 twenty twenty three.

The main difference between GAAP and non GAAP loss per share was due to stock based compensation, depreciation and amortization expense and expense relating to a certain batch production incident. I will now turn to the full year 2024 results. Total (EPA:TTEF) revenue for the year 2024 were $57,900,000 exceeding our guidance of between $57,200,000 to $57,500,000 This compare to full year revenue from 2023 of $84,200,000 Revenue from the cross industry business were $36,300,000 of which Acronym contributed $3,400,000 compared to $57,400,000 in 2023. This decrease was due to customer walking through excess inventory which slowed the pace of orders as well as the weakness in their end markets. Automotive business revenue was $21,600,000 down 19.4% from $26,800,000 in 2023 due to gradual price erosion and a reduction in the number of units sold to Mercedes Benz.

GAAP gross margin was 59.2% for the full year 2024 compared to 62.5 in 2023. On a segment basis, 2024 gross margin from the cross industry business was 71% and gross margin from automotive was 39.5%. This compares to gross margin of 77.131.1% respectively in 2023. The increase in 2024 automotive gross margin was due to an optimization of our product costs. The decrease in gross margin of the CAB was due to product mix shift and lower fixed cost absorption.

Non GAAP gross margin was 62.9 percent for the full year 2024 compared to 63.9% in 2023. Full year 2024 operating expense were lowered reaching $75,600,000 compared to $79,500,000 in 2023. The year over year decrease of $3,900,000 in OpEx was driven by decrease in R and D expense mainly due to the efficiency plan we deployed at the end of Q3 twenty twenty three. R and D expense decreased by $7,700,000 due to a $2,200,000 decrease in payroll expense, a $3,300,000 decrease in IP related expense and $1,000,000 decrease in chip tapeout expense. On the other end, operating expense were negatively impacted by the increase in SG and A expense in the amount of $3,400,000 year over year mainly due to a $2,200,000 expense relating to a certain batch production incident recorded in 2024.

Moving to net loss and adjusted EBITDA. GAAP net loss for the full year 2024 increased to $36,600,000 from $19,700,000 in 2023. Adjusted EBITDA loss for the full year 2024 was $21,100,000 a decrease compared to $10,300,000 in 2023. GAAP net loss per share for 2024 was $0.35 a decrease compared to $0.9 in 2023. Non GAAP loss per share for 2024 was $0.15 a decrease compared to $0.05 in 2023.

Now turning to the balance sheet. We ended 2024 with a strong balance sheet with cash, cash equivalents and short term deposits totaling $131,000,000 and no debt. This compares to $133,100,000 at the end of Q3 twenty twenty four and $142,000,000 at the end of twenty twenty three. Our working capital at the end of the quarter was $133,600,000 compared to $136,100,000 at the end of Q3 twenty twenty four and $158,800,000 at the end of twenty twenty three. Our inventory as of 12/31/2024 was $10,200,000 down from $11,700,000 on 09/30/2024 and $13,800,000 on 12/31/2023.

Maintaining a revised balance sheet allows us to execute our strategy, fund our growth plan and position us for sustainable profitability. During 2024, we completed the acquisition of Aquanem for a total consideration of $7,800,000 in cash and potential earn out of up to an additional $7,200,000 that should be paid during 2025 depending on the achievement of certain revenue, EBITDA and cash flow targets in 2024 and 2025 and the development of a certain product by June 2026. The company is actively looking for more acquisition opportunities with a focus on companies generating revenue with a clear path to profitability, particularly in the pro EV and industrial machine vision markets. In addition, we recently announced another share repurchase program of up to $15,000,000 following the completion of a $10,000,000 program we announced in late twenty twenty four. The new share repurchase program reflects our confidence in the company’s long term growth and commitment to enhancing our shareholders value.

Now, I would like to provide our guidance for the first quarter of twenty twenty five and the full year of 2025. For 2025, we expect our annual revenue to be in the range of $71,000,000 to $76,000,000 which represents a year over year growth of 23% to 31%. We expect Q1 revenue to be in the range of $16,300,000 to $16,600,000 We expect gross margin for Q1 to be in the range of 60.8% to 61.3% and we expect adjusted EBITDA loss in Q1 to be in the range of $4,500,000 to $4,200,000 loss. I would like to remind you that our five years plan which represented in November 2024 set our long term financial goals. We are targeting that by 2029 our revenue will be in the range of $220,000,000 to $300,000,000 with gross margin in the range of 50% to 60% and EBITDA margin in the range of 15% to 20%.

I’ll now turn the call back to Gideon for his closing remarks before opening the call for Q and A.

Neil Young, Analyst: Thank you, Guy.

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: We believe that Valens Semiconductor is well positioned for returns to growth in our target markets, 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 now open the call to answer your questions. Operator?

Conference Operator: Thank

Neil Young, Analyst: Hey, it’s Neil Young on for Quinn Bolton. So within the cross industry business, which end markets are showing the strongest demand in the near term? Are there any showing weakness? And then also looking forward, how should we think about the growth trajectory for this segment throughout 2025? Thanks.

And then I have a follow-up.

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Thanks for the question. And the answer is not simple. The answer is mixed and I will try to simplify it. There is the we have the traditional audiovideo market, which we are a strong player and this was the market that suffered from weakness in the past year. Yet, the market has new opportunities, which are very natural for us to continue such as the hotel room, the small conference room and all the traction that is to connect the cameras which is just below the TV to the room.

This is a market which is a growing market for us and in a sense is a kind of a low hanging fruit because it’s a natural progress for our customers. When we speak about industrial market, we definitely speak about larger magnitude, but it’s not as fast as not as a natural growth because some of the customers are new customers. So on one hand you have more demanding market. We answer there a very painful need, but it’s a market with a different characteristics. So if you look at the market, the traditional Pro AV, the new AV opportunity, which is the conference room and the market of the machine vision, I believe there is the differences will be about the timing, about the magnitude and sometimes longer time is also longer magnitude, which is nature in this case.

But in general, all three of them are very appealing to us and we’re very much looking forward for all the three.

Neil Young, Analyst: Okay, great. Thanks. And then could you walk us through the key drivers behind the gross margin guide for the first quarter? And then additionally, do you see this level sustaining beyond the first quarter? Or should we expect any fluctuations in the margin profile throughout the rest of the year?

Thanks.

Guy Nathanson, Chief Financial Officer, Valens Semiconductor: So for the CAB, we’ve seen a product a specific product shift. It might be changed in the following quarters. For the automotive, we think it will be more sustainable because we were able to optimize the cost structure of the device of the chip and this is why we believe it will continue in the following quarters as well. And the overall the average gross margin of the overall company is very much dependent on the ratio of the revenue between the CIB and automotive. So and it’s yet to be seen.

Conference Operator: The next question is from Rick Schafer of Oppenheimer. Please go ahead.

Wei Mark, Analyst, Oppenheimer: Hi, good morning. This is Wei Mark on the line for Rick. Thanks for taking the question and congrats on the results. For my first question, in your prepared remarks, you talked about emerging from the bottom of the cycle. I was wondering if you can expand on this, anything you can share on customer demand today compared to ninety days ago?

What are you seeing that gives you confidence in this outlook? Thanks.

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Okay. Thank you very much for the question, Wei. And the answer here is as follows. We have some access and we speak with our customers to learn from them what they sense from the market. And we some of them obviously suffered from the same weakness in the past year and they are our sources to know the recovery of the market.

So this is one source and this is one of the reasons for this optimism. The other source for the optimism is that we’re actually not looking only in the same market as we did before and we add to the market we had before also the connecting the camera to the room and the USB C connection there or product VS6320 which represents new opportunities for us. One of them we announced a few weeks ago about the collaboration with Sennheiser and we hope and we’re working on this market very hard. And this is a natural growth of this market, which I think we prepared ourselves well enough to be positioned well for this market. So the answer is both the source of our customers that share with us optimism about the recovery that they see and this is actually the best way for us to know what happens in this market because they are the ones that are sensing their customers and their channel.

And the other is the product roadmap that enable us to penetrate other segments of this market, which we didn’t haven’t been before.

Wei Mark, Analyst, Oppenheimer: That’s good to hear. Thanks. As for my second question, I want to shift over to auto. In December, there was an M and A announced for one of your competitors in vehicle connectivity market. I was wondering if you can share your thoughts on this.

How does it change the competitive landscape? And how do you see AFI positioned to compete against them?

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Yes. We definitely sense this M and A. We’re not here to explain every M and A then the logic behind it. We’re very persistent that whenever you go out with the resolution and the bandwidth, the problems are different and we’re very confident that A5 is the best and by far the unique solution to cope with high bandwidth with unshielded cables and the fact that one company been acquired or the second company been acquired that represents a derivative or what’s supposed to be a derivative of Ethernet doesn’t confuse us. I can tell you something, I don’t know, we said it in the past.

We could go on this standard very easily. For us, it’s a definite subset of the complexity of what we chose to do. We chose to go on AFI not because we just look for the highest technological barrier. We chose on AFI because we predicted that the market, when they go on higher resolution and they have big higher bandwidth and the ADA system wants to cover more potential accident cases, they will have no chance but to have more data and more data is more bandwidth and more bandwidth is more exposure to noise and Valens’ ability to do it is unbeatable in a big, big gap and we’re always welcoming companies to challenge my sentence here and my declaration here. And yet, we hear news and definitely every company has to do the to maximize their ability and their presence.

At the end of the day, there is marketing and there are chips. And when it comes chip against chip, semiconductor and against semiconductor, we believe we are not winning in points, we are winning in knockout. And the three design wins we had are people who have far easier and more access to any other technology than to us and it simply failed and they came to us.

Wei Mark, Analyst, Oppenheimer: Great. That’s good to hear. Thank you.

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

Suji Desilva, Analyst, Roth Capital: Hi, Gideon. Hi, Guy. So, maybe perhaps on the auto side, you could update us on the three European OEMs. And just remind us of the L2 or L2 plus the programs and what the timeframe expectation is there? That would be helpful.

Thanks.

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Okay. Hi, Sujeet. Good to see you while going in the show in the CES show. And the answer is as follows. We have dates and I will tell you what we predict it is, but I want to say a statement.

We are working in the automotive industry. Automotive industry, sometimes there are delays which are depend because of a different total component relating to a seat of the car, a postponedable car. And we are subject to this, so we have the date but do have the dates, we have the expected that we’ll start to see chips shipped and embedded in the cars within end of twenty twenty six. It can be a little bit earlier or later, but that’s what we’re hitting for. But this is this market and I guess everyone knows automotive, know that’s very hard to predict the exact date.

It has also an advantage. It also lasts more because of that. So actually from the end of the day, what you think is actually you will be out of the design win after several years, it also takes more time. So the long tail is also longer. So that’s no who wants to play in the automotive industry, that’s the game and we decided to play.

Suji Desilva, Analyst, Roth Capital: Okay. And the cars were L2, L2 plus, Gideon, just to clarify or L3?

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: I will tell you that you will be very happy to drive each of them.

Suji Desilva, Analyst, Roth Capital: Okay. Good to know. And then, great. And then maybe switching over to the industrial side, the medical imaging, what’s the timing of that opportunity? And are you using go to market partners there for to target that

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: market? Okay. Well, I must say that the medical and I must admit you the market that came to us, we were not proactive in meeting this market and we’re very happy about the market been approaching us because of the unique need that seems that we have here. When we had the meeting in New York with the investors, we were put it many, many years ahead. I’m today more optimistic that it will be earlier than I said, but it will be I don’t have enough information to give a date, but I would say it’s earlier than what we thought significantly.

Suji Desilva, Analyst, Roth Capital: Okay. Okay, great. And then maybe lastly, Gideon, just you said acquisitions are an important part of the strategy. How is the environment for Target (NYSE:TGT)’s valuations? Just give me any thoughts there as to how the opportunity is right now for you guys?

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: There are different opportunities. Some of the opportunities are around companies that made many M and As and found out that they are serving too much of debt and they are selling some of the activities that were not merged very good in plan, which is one kind. And the other companies which are might be good companies, but VCs which are tired of being so many as the company or family businesses that are there are no inheritance and no one to no next generation to take it. So a lot of you know we are in both the AV and the industrial are not VC backed and not private equity backed. It’s a lot of family businesses and the nature of family business is different than those which we are far more aware on the public market and VC and all this chain.

So and a lot of it is fluctuated. So we don’t see very big change, very large changes in the expectation for price or the willingness to sell. For good and for bad, it’s the same market. It’s less volatile than the market that are exposed to pension funds, stock market, VCs, private equity and so forth.

Suji Desilva, Analyst, Roth Capital: Okay. All right. Thank you, Gudik.

Conference Operator: The next question is from Dave Storms of Stonegate. Please go ahead.

Dave Storms, Analyst, Stonegate: Good morning and appreciate you taking my questions. I wanted to start by asking about maybe the cadence of your guidance for 2025. Should we expect a gradual ramp through the year? Or are

Wei Mark, Analyst, Oppenheimer: there other variables that could

Dave Storms, Analyst, Stonegate: lead to a step up that we should keep in mind?

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: I skipped some of the words. You asked about design wins in 2025?

Dave Storms, Analyst, Stonegate: The cadence of your guidance in 2025.

Guy Nathanson, Chief Financial Officer, Valens Semiconductor: Our guidance. Okay. Let’s guide, please. So, we did not provide we provide the overall guidance for the year and we provided guidance which is $71,000,000 to $76,000,000 of revenue. We provided the guidance for the first quarter ’16 to sixteen point three sixteen point six to sixteen point six.

We did not provide the following quarters. Generally speaking, I would say that we expect some ramp in the second half of the year because for example the 6,320 designs that are expected to be matured and released to the commercialized to the market during the second half of the year. But this is currently what we could say.

Dave Storms, Analyst, Stonegate: Understood. Thank you. And then just in the CIB, curious as to what you’re seeing in the new customer acquisition environment. Maybe see how you see that evolving over 2025 as some of this inventory digestion takes its course?

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Well, as I am firstly for the question. And as I said before, the inventory digestion, we see it recovering. And we think 2025 will be between high part or almost not the total recovery of the market, but the market is recovering. And sorry, so we see the recovery and we hear that there are digestion of inventory in most of the customers, not with all of the customers, but with the majority. Some of them are at the level of 2019 now, some are not.

But in general, we see that the inventory crisis is behind us and picking up back.

Guy Nathanson, Chief Financial Officer, Valens Semiconductor: Back.

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

Gideon Bensvi, Chief Executive Officer, Valens Semiconductor: Yes, please. I would like to thank you all for joining today and for the fourth quarter full year twenty twenty four earning call and for your continued support, interest in Valens Semiconductor and I’m sure and hope that we’ll meet again in our next earning call and looking forward for this interest in Valens. Thank you all.

Conference 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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