Valens at Oppenheimer Conference: Strategic Focus on Connectivity

On Monday, 11 August 2025, Valens (NYSE:VLN) presented its strategic outlook at the Oppenheimer 28th Annual Technology, Internet & Communications Conference. The company, led by CFO Guy Nathanson, highlighted its position as a leader in fabless semiconductor solutions, targeting sectors like automotive, professional audio-video, and industrial machine vision. Despite optimistic projections of growth driven by ADAS and market diversification, Valens acknowledged challenges such as tariffs and extended timelines for market deployment.

Key Takeaways

• Valens anticipates an 18% year-over-year revenue growth for 2025, targeting $66 million to $71 million.
• The company is focusing on long-term growth, with a projected revenue of $220 million to $300 million by 2029.
• Tariffs impact automotive revenue, while ProAV faces inventory corrections post-COVID.
• Acronym acquisition aims to enhance USB connectivity solutions.
• The company is optimistic about ADAS applications, projecting significant growth from 2027 onwards.

Financial Results

• 2019 Revenue: Approximately $60 million, driven by ProAV.
• 2021 Revenue: $71 million, including contributions from Mercedes Automotive.
• 2022 Revenue: $91 million, with ProAV at $74 million and Automotive at $60 million.
• 2023 Revenue: Declined to $84 million due to COVID impacts.
• 2024 Revenue: Dropped to $58 million, affected by ProAV inventory corrections.
• Q1 2025 Revenue: $16.8 million; Q2 2025 Revenue: $17.1 million.
• 2025 Revenue Guidance: $66 million to $71 million, with a gross margin of 63.5%.
• Q3 2025 Revenue Guidance: $15.1 million to $15.6 million, impacted by tariffs.
• Cash Balance at end of Q2 2025: $103 million, with a $25 million share buyback program.

Operational Updates

• ProAV is expected to recover, with expansion in huddle rooms using the new VS6320 chip.
• Automotive sector faces tariff challenges, but ADAS applications are anticipated to ramp up between 2027 and 2029.
• Industrial Machine Vision is a new vertical, with initial revenues expected in 2026-2027.
• The partnership with iCatch aims to enhance AI-based camera applications.

Future Outlook

• ProAV targets a revenue of $90 million to $100 million by 2029, with a 65-75% gross margin.
• Industrial Machine Vision aims for $35 million to $50 million by 2029.
• Automotive revenue projected between $65 million and $110 million by 2029, driven by ADAS.
• The company expects to achieve an EBITDA margin above 15% and become EBITDA positive at an annual revenue run rate of $120 million.

Q&A Highlights

• Demand is improving year-over-year, but Mercedes faces tariff-related challenges.
• Confidence in Q4 is supported by backlog and customer discussions.
• 2026 Outlook anticipates moderate growth in ProAV and potential recovery in Mercedes sales.
• Inventory is cautiously managed, with slight increases due to longer lead times.
• The VS3000 is gaining traction in video conferencing, while the VA7000 is expected to ramp up in ADAS and machine vision applications.

For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - Oppenheimer 28th Annual Technology, Internet & Communications Conference:

Rick Schafer, Semiconductor Analyst, Oppenheimer: Oh, good morning. Good afternoon, everybody. Thanks for joining us. I’m Rick Schafer, Semiconductor Analyst at Oppenheimer, and I’m joined today by Valens’ CFO, Guy Nathanson. Guy joined Valens last year in 2024.

He’s got a long tech resume. He brings, I think, more than you’ll correct me, Guy, but more than twenty years, I believe, of executive leadership across semiconductors and medical imaging and industrial verticals. So I know pretty extensive experience over the over the decade. So, anyway, great to see you guys. Thanks for joining us.

I’ll I’ll turn the mic over to you, for the presentation. And at any time at the end, we’ll we’ll open up for q and a, everyone. Thanks.

Guy Nathanson, CFO, Valens: Thank you, Rick. Thank you. Hello, everybody. My name is Gaynathan Zon. I’m the CFO of Valens.

It is a pleasure to be here today. So Valens. Valens is the high performance connectivity company. We are a fabless semiconductor and with the developed technology that knows how to deliver video in high quality, low latency over long reach of cables. We have the highest bandwidth, the longest reach, and the lowest error rate.

We’ve been established about twenty years ago. We are publicly traded in the New York Stock Exchange since 2021. 260 employees, more than 40,000,000 chipsets sold to date. Q two twenty twenty five revenue, $17,100,000. We are we have two global industry standard, 125 patents, half a billion dollar accumulated r and d expenses, r and d hundreds of customers, and we address a total market of $5,000,000,000.

What are the pain points of wide connectivity? First, there are too many cables. Distance limitations, video resolution that require higher capacity, rough environment like electromagnetic interference, high cost of infrastructure, and installation complexity. We serve two main segments. The first one is the cross industry business, which includes two main verticals, the professional audio video and industrial and machine vision.

The other segment is automotive. Other vertical of the professional video, we serve video conferencing and education market. We’re already working with companies like Crestron, Ekstron that provide the overall system, Companies like Epson, Panasonic, NEC that provide projectors when we connect the projectors to the screen in the other side of the room. Companies like Logitech in with applications like cameras or video bars and and companies like Atlona. We also work in other sub verticals like digital signage and entertainment working with companies like Panasonic and Sony on video balls or Samsung on LG Electronics on screen display screens.

We also work in another vertical, which is the industrial machine vision. We already have customers like B and R and Siemens when we connect industrial PCs to the screens that are located remotely or in medical applications when we connect MRIs with companies like Siemens or Medtronic to the screens that are located in the other side of the room. In the segment of the automotive, we currently have one customer, Mercedes, and we have another design win already announced with Mobileye when that we expect to start generating revenue from late twenty six, early twenty seven. The core competency of the company is around the DSP. We have 125 patents, accumulated investment of half a billion dollar to date in r and d expenses, and I can say that we have one of the best r and d design teams in the world in terms in the area of the semiconductors.

What is unique about our technology is our ability to handle electromagnetic interference in the channel. We have developed algorithm that, by definition, assumed there is a noise in every channel and knows how to handle this noise and eliminate it, and this brings a lot of value to our customers. I’ll start from the first with the first market, which is a professional audio video. The main vertical in this market is the video conferencing vertical, which represent opportunity for the company of $350,000,000 by the year 2029. We believe that the video conferencing market is expected to continue growth due to the hybrid work and mainly due to the hybrid education in the next few years.

We’ve seen companies like Microsoft Teams and Zoom invest significant amount of money in certification programs for hardware devices for video conferencing systems, and we’ve seen companies that developing AI based applications into this market. One example application we are part of is application when there are cameras spread around the room that knows how to focus on the one that is now talking with AI based application. We’re partnering with a company called iCatch in this vertical. We recently in 2024, actually, we announced a new chip for this market, the v s sixty three twenty, which has USB type c connectivity. This chip will allow us to increase our footprint in the market.

If until today, we used to concentrate on the high end of the market, with this chip, we can penetrate to the smaller size in the huddle rooms. For example, in my own office, I have my computer, my laptop that can be connected with USB type c, which is becoming kind of universal standard in our industry, to a docking station and with a docking station with HDMI through the wall to the screen in the other side of the room. Until today, we did not have any present in these type of rooms. And now with this new product, we expect to have significant presence in this type of rooms, which will support our growth in the future. We expect customers releasing products to this market toward the end of this year, early next year, and ramp pickup of the revenue from this product starting from ’26 and beyond.

We are part of a standard called HDBaseT partnering with companies like LG, Sony, and Samsung. We can say that if you would like to be HDBaseT compliant, you need to work with Valens. This other segment is the automotive. Our main focus is on ADAS, autonomous driving systems. We expect that by the year 2029, this market will represent for the company opportunity of $4,500,000,000.

This is based on the number of cars and the number of cameras that are expected to be in every car with the deployment of the advanced ADAS systems. What is the use case? Imagine a child crossing the street. In the camera the camera in the car will take a video picture of the child and will deliver the video picture over the cables in the car to a centralized computing system. For example, such system that is being developed by Mobileye.

In the system, there will be a very fast analysis of the video picture in order to identify if the car should be stopped immediately or not. This whole process should take only a few milliseconds and require high quality video, low latency that can be delivered over low over long reach of cables, and another unique advantage that we have our ability to handle electromagnetic interference in the car because you cannot allow yourself even one millisecond of disconnected of the video. We know how to do it much better, and there are a lot of them in the car because of the solar towers inside of the road, of the electricity in the car, because of the engine in the car. And this is a key advantage of Valens for the automotive market, especially for advanced ADAS system. We announced few months ago on first three design wins with leading European OEMs.

We cannot disclose the name, but we did disclose that Mobileye is our strategic partner for these design wins. We hope to continue and work with Mobileye, which is considered to be a market leader on new opportunities in the future and become a real strategic partner to Mobileye. In parallel, we are working with different OEMs globally. In evaluation process with a lot of them. We see more and more interesting solutions around our technology, but we expect initial revenues from ADAS systems in ’27, ramping up ’28, ’29, and beyond with full deployment of ADAS beyond the year 2030.

So ADAS is a huge opportunity for the company, but it’s more a long term play. Today, we sell to automotive in one with one customer, Mercedes, around infotainment application. It was like a one time opportunity, and we took it delivering video to the screens in almost 50% of the model of Mercedes. This product was commercialized to the market starting from 2021. And in 2024, it generated to Valens more than $20,000,000 of revenues for the year.

Another application is around long vehicles. We were partnering with a company called Stoneridge, delivering video from the rear of the truck to the front and also surround view of the truck over the electricity cables in the truck. It will be commercialized in ’26. It’s not a huge market, but could be very profitable and relevant for the company. We are part of a standard called partnering with other large companies in the standard.

Our main competition in automotive coming from legacy products of analog device and TI, for example. They are already in the market. These are huge companies. It’s very tough competition to convince OEMs to replace these type of companies with Valens. But we have technological advantages, and I can tell you that when we win a design win, we need to win in knockout.

And this is exactly what we did in those design wins that we already won with technological advantages around the capacity, the resolution of the camera, and our ability to handle electromagnetic interference in the car. There is a whole ecosystem around MIPAify from different type of companies delivering different type of products. All the big names in the industry are here, so we expect continuous growth for products into this environment with the MEPA if I start out. Another vertical that we started to address only in late twenty four is the industrial and machine vision. This vertical represent for the company opportunity of almost half a billion dollar by the year 2029.

There is a rise of the machine vision due to increased factory automation addressing workforce shortage and increased cost of labor, tighter inspection regulation, and increased ecommerce resulting in growth in AMR for warehouses. Our customers are potential camera manufacturers, And here is an example to illustrate the use case around machine vision. Imagine manufacturing machine of small parts. In the end of the line, there are two cameras that aim for visual inspection for quality purposes. In order to do this work properly, they need to deliver high quality video in low latency over a long reach of cables because in industrial environment, you cannot use wireless because of the noise, to a computer that is located remotely because industrial environment typically are in a very large spaces.

On the PC, there is AI based application that knows how to do visual analysis, computer vision of the video picture, and identify which parts should be disqualified for quality purposes and should be eliminated. This whole process should take only few milliseconds. Again, our ability to hand to deliver high quality video, low latency over long range of cables and handle electromagnetic interference, and there are a lot of them in industrial environment, creates significant advantage to our solution. And on top of it, we know how to reduce the cost of the cables in the machine vision systems, and we have developed a very good applications for preventive maintenance in these applications. As explained, we’ve started our first steps in this market, late twenty four, around existing chips, mainly around the chip from the automotive, the v a 7,000, which has a small form factor, low power consumption, and has CSI two interface, which is very much relevant for this market and make it a deal candidate for integration into camera.

We’ve already been able to announce on collaboration with few partners like d three, Framos, RG Cherry, when, for example, we announce on platform for robotics applications. We see more and more cameras usage in robotic application and so on. We expect initial revenue late twenty six ramping up from ’27 and beyond because of the design win cycle in this industry. I would also add that we are already working in industrial environment with different type of companies with revenues which are not very significant, but still very lucrative customers, companies like Siemens, B and R, and Beckhoff delivering video from industrial PCs to screens that are located remotely in the other side of the industrial space. Another vertical that is still more like a future opportunity is around the single use endoscopy.

Today, there are 250 endoscopy procedures every year in the world. Recently, FDA announced that in order to eliminate infection, you would like to encourage the meta companies to move to single use devices. This creates a huge opportunity from our perspective, which is is estimated that more than 600,000,000 a year when this product will be ramping up. The use case, again, small form factor, low power consumption, the ability to deliver high quality video, which is very important for the doctors, and the ability to handle electromagnetic interference in the surgery room. I can tell you that the initial feedback we received for the mark from the market is very positive, and there are some partners that are already starting doing evaluation process with us.

It’s more like a long term play for the company. We expect initial revenues maybe in ’28 and beyond. Still hard to quantify, but it looks like at least in the beginning of the journey, we have a good product market fit. In the medical, we already have some applications with companies like Medtronic connecting MRIs to screens in the other room. So from our perspective, medical is expected to be significant growth driver in the long term for the company.

So Valence has one technology core technology with families of chipsets based on the same technology, the same PHY, serving different verticals, different markets. Sometimes the same chip can serve different type of customers in different applications in different markets. Getting to the financials. In 2019, company had revenue of around $60,000,000. 2020, the same all the revenue were generated by the professional audio video vertical.

’21 was the first year when we were able to generate revenue also from Mercedes from automotive, ramping the revenue to $71,000,000 while the ProAV continued to be in the range of the $60,000,000. In ’22, we it was a peak year. The revenue in the professional video were significantly increased to $74,000,000 because of the COVID, the post COVID effect. Customers were afraid to be left without inventory and actually bought more than they needed in order to secure inventory. Automotive grew to $60,000,000, and the overall revenue for the year were $91,000,000.

’23, the professional division got back to the normal level of around the $60,000,000 a year. The automotive continued to grow to $27,000,000, bringing the overall revenue of the company to $84,000,000. ’24 was a rebound year to ’22. The professional video declined significantly to 36,000,000 because in the beginning of the year, our customers still had high level of inventory because of ’22. And in addition, their customers, the video conferencing manufacturer, suffered also from significant decline in their business because many companies invested a lot of money in building new video conferencing rooms after the COVID, and ’24 was kind of relief year for them.

The overall revenue of the company declined to $58,000,000. For ’25, we started getting back to growth. The first quarter, 16.8. The second quarter, 17.1 above the guidance. And for the year, the guidance is anywhere between 66 to $71,000,000.

If we take the midpoint of the guidance and we compare it to the revenue of ’24, we see growth of 18% year over year in the revenue. Gross margin for the ’25 were 63.5%. The CIB is around the 70% gross margin. The automotive is around the 50% gross margin with good improvement in the last few quarters in automotive gross margin because of the product cost optimization and EBITDA loss of $4,000,000. In in the second half of the year, we expect to see some headwinds because of the tariff.

Q three, it looks like we’re going to have revenue anywhere between 15.1 to 15.6 mainly because of the tariff. A gross margin, 58% to 60%, and EBITDA loss of anywhere between 6.8 to $7,400,000 of EBITDA loss. Q four should be better bringing the overall revenue for the year anywhere between 66 to $71,000,000. We have a strong cash balance end of the quarter, $103,000,000. In the beginning of the year, we had a $131,000,000.

During the year, we announced on two buybacks programs. One of them actually was announced in ’24, and and the other one was announced during the year in ’25, accumulated amount of $25,000,000 of buyback share repurchase program until today. In July, we completed the second buyback. And in ’25, we had $20,000,000 of a cash and cash up influence because of the buyback program. Inventory level end of the quarter, 11.5, slight increase versus the previous quarter because of the increased demand and because of the fact that we see some longer lead time with our suppliers.

On November, we announced on a strategic new modified strategic plan for the company, and we set the long term goals for the company for the year 2029. We said that we expect to bring the business by 2029 to anywhere between 220 to $300,000,000 of revenue, means 30 to 40 growth year over year over the course of the next five years. We said that in the short term, we expect growth coming from the professional audio video mainly because of the recovery after the 2024 year and because of our expectations to increase our footprint in more parts of the market, for example, the other rooms and the small size video conferencing rooms. We said that by the end twenty twenty nine, we expect this vertical to grow to anywhere between 90 to a $100,000,000 and be anywhere between 65 to 75 percent gross margin. Industrial machine vision, we’re a newcomer.

It’s a it’s a it’s a new vertical from our perspective. Initial revenues are expected ’26, early twenty seven. So we expect to bring this business from maybe $1,000,000 today in industrial applications to anywhere between 35 to $50,000,000 by the year 2029 with gross margin of anywhere between 55% to 65%. Automotive, as I said, the real growth driver is coming from ADAS. Currently, we’re only with Mercedes.

ADAS is expected to generate initial revenue starting from ’27 with full ramp up in ’28, ’29, and beyond. We expect by ’29 to see anywhere between 65 to a $110,000,000 of revenue from automotive with gross margin of anywhere between 35% to 45%. In the long term, we expect significant growth drivers, first of all, from first of all, ADAS because of the full deployment of ADAS beyond the year 02/1930, and then also from the medical, especially around the single dose endoscopy, which currently we could not quantify and did not include it as part of the forecast. Altogether, we expect above the 50% gross margin for the company, above the 515% EBITDA margin for the company. The company can be EBITDA positive at annual run rate of revenue of $120,000,000.

At this stage, it is hard to say when it’s going to happen. So to summarize, Valence expects significant revenue course over the course of the next three years, target of four to six times higher by the year 2029. Diversification among different verticals and industries. Design cycle, long sales, and product life cycle provides long term customer engagement and good visibility. Profitable business model above the 50% gross margin, above the 15% EBITDA margin, and a strong cash balance that supports our future growth.

Thank you.

Rick Schafer, Semiconductor Analyst, Oppenheimer: Thanks. Thanks, Kai. Maybe I’ll kick things off if you’ve got time for a couple of questions. I was hoping you could just recap maybe you guys just reported last week, but I was hoping you could maybe recap 2Q a little bit more. I mean, I think that was your fifth consecutive quarter of growth.

Obviously, things have slowed a little in 3Q, as you mentioned in your prepared remarks around some of the tariff impacts. So I was just curious if you could sort of recap some of the latest events and sort of I’m really particularly interested. Are you are you in what you’re seeing in terms of demand, pull ins or push outs or or sort

Guy Nathanson, CFO, Valens: of what what the what

Rick Schafer, Semiconductor Analyst, Oppenheimer: that order for order flow looks like right now for you.

Guy Nathanson, CFO, Valens: Okay. So I would say in general that the year is expected to be we we expect it to generate significant growth versus last year. Currently, the midpoint, 18% year over year, so we see a better demand that we used to see last year. We see continuous recovery in the professional space. It’s not a a it’s a slow recovery, but a recovery versus the year 2024.

In automotive, we are mainly around Mercedes. To be honest, Mercedes is not doing great this year because of the tariff. They were already announced on this, and there are a lot of articles about this factor. And we currently totally dependent in the automotive sector in Mercedes. The other verticals should expect to start generate revenue for the company in late twenty six, early twenty seven.

So altogether, I think that the demand in the looks okay. There are some areas when we do feel some challenges because of the tariffs and some areas that we we feel are we are better than last year, and, we feel more high level higher level of confidence. In Mercedes, we have a challenging year, and we hope that next year that it would be better.

Rick Schafer, Semiconductor Analyst, Oppenheimer: No. Thanks, Scott. And and I think everybody appreciated that you gave that full year guide, you know, on your call, But it does imply a relatively nice bounce in 4Q. And so I’m just curious, what’s that confidence based on in your mind? I mean, is that the order velocities you’re seeing today for 4Q delivery?

So is it backlog building? Is it is sort of if you could give us some color on on what then what informs your confidence, I guess, on four q.

Guy Nathanson, CFO, Valens: So we have some backlog, and we have discussions with customers that typically we know how to assess these discussions and and provide estimation what is the probability that these discussions will be converted into purchase order eventually. So I think that we have a reasonable level of confidence that q four is going to be okay. But, again, we we still need to work very hard in order to achieve this. For ’26, I can tell you that from initial discussions that we have with customers, we expect to see a moderate growth. I would put a disclaimer.

First of all, it’s too early. We still don’t, have full visibility for ’26. Second, we’d still not know what will be the impact of tariffs or new tariffs or are there any other surprises around the corner in that aspect. But according to what we see right now, we expect continuous growth in the professional audio video, again, slow growth, and we expect and hope that Mercedes will be able to recover and have a better year next year because of the impact of the tariff this year. So altogether, we would like to believe the ’26, we should expect to see another moderate growth.

And ’27, we expect to see new growth drivers coming in, again, from the machine vision, from the ADAS, with ramping up ’28, ’29, and beyond. And the message I would like to convey here is that Valens is more like a long term plan. We we truly believe that in the short term, we can continue and increase the revenue, But, eventually, the new verticals, ADAS, machine vision, and hopefully also medical will be reflected in in in in all power starting from ’28, ’29, and beyond. So this is more like a long term play.

Rick Schafer, Semiconductor Analyst, Oppenheimer: No. Thanks for that, Guy. You know, on the inventory side, you guys have been clearing out, excess inventory for for a while, since the pandemic. And so I just was, you know, hoping you could give an update on where you stand now with that effort. Are you happy with current inventory levels?

Or is there still I mean, are do you feel like when we get to four q or or maybe even here in the third quarter that you’re shipping to consumption? Or is there still a little more work left to do on on inventory?

Guy Nathanson, CFO, Valens: Do you mean our inventory level?

Rick Schafer, Semiconductor Analyst, Oppenheimer: I I was more you know, speaking of your inventory, but also the channel. I believe you’ve been bringing down, inventories for for a while, and I just was curious what sort of where we were with that effort.

Guy Nathanson, CFO, Valens: Okay. So our inventory level are reasonable. We had a significant drop from ’22, and now we increased a little bit the inventory because of different reasons, including some, I would say, a a supply chain. The supply chain looks like, again, getting back to a longer lead time, so we wanted to build inventory. We’re approaching the second half of the year, end of the year, and we do not want to miss revenue because of lack of inventory.

So it was very important for us. We’re again, we’re doing very cautiously. We’re trying to manage this very carefully, and, we hope that, we’re in a optimized level of the inventory in our balance sheet.

Rick Schafer, Semiconductor Analyst, Oppenheimer: Okay. Thank thank you. So maybe I’ll pivot if I could to the cross cross industrial piece of the business and specifically the v s the sixty three twenty. You guys have obviously I mean, you look at like the you look at the 3,000 chip for ProAV and it’s gaining a ton of momentum. I mean, I think I believe you’ve you’ve expanded it beyond a 150 customers or engagements.

And I was wondering on that particular on on the 3,000, sort of what applications or end markets, are are really behind that. You know? It just seems like it’s it’s got some good momentum.

Guy Nathanson, CFO, Valens: Yes. So the applications are mainly around the video conferencing. We have also provided some names of companies, like, for example, Crestron or Kramer that are a traditional player in the video conferencing systems. The three thousand knows how to deliver HDMI two point zero with USB two point zero, and it used to be more on the high end of the market in the last three years. And now it’s getting into the mid of the market.

We’re becoming, like, the new industry standard. And this is a good example to illustrate that the industry the the professional video market is is moving forward, but relatively in small pace because this chip already been introduced to the market in 2019. And this is now the the year when we see some upside in the revenue and significant growth in number of customers’ products from 100 to 150 between ’24 to today. This is a good sign. That means that our customers really appreciate working with us.

We have almost 200 customers in the area of the professional video. Most of them are with us for years, and they continue and moving up with us from one generation to the other. And this shows stickiness and provide good and high high level of comfort that we continue and grow in this business. It should be emphasized that, this market is, you know, more moving a little bit slow, but still moving forward and growing year over year. The $63.20 is a chip that should take us to different verticals in the market to the smaller size in the huddle rooms as, like, the example I gave in the presentation, and that should increase our footprint in the market and support the growth in the future years.

Again, also in the 6320, we see a good pace of adoption by customers. More than 70 customers’ products already are there. Should we expect launches of this product and ramping up these products toward ’26 and beyond? The cycles the design win cycle in this industry takes long time, And then there is the product launch by the customer, which also takes a long time. But on the other end, once you’re in, it’s very hard to get out.

So, again, this is also a long term play.

Rick Schafer, Semiconductor Analyst, Oppenheimer: Oh, thanks. And, I’m just curious, switching gears just slightly to Acronym, and I’m curious how Acronym, you know, in your words, you know, sort of complements, you know, I know, obviously, USB hubs and switches, but how does that complement your core existing, you know, tech at at the lens? And and I’m curious what your long term plans are for for Acronym.

Guy Nathanson, CFO, Valens: Okay. So Acronym is playing in is not a cheap company. They provide the overall solution. And, we found that many customers sometimes need a solution not at the cheap level, but at a subsystem level. And this could be kind of complementary product to our offering to our customers.

We would like, to be, a leading company in the area in the world of the USB connectivity, and Acronym provided us some complementary products both in the world of the professional video and also in the industrial world. So this is a important piece to and and and kind of complementary capabilities to what we know to do. It’s a very good team of engineering located in Boulder, Colorado, and we are very excited about this company. Again, acquisitions of new companies always take some time. The integration takes some time, and and the the natural cultural differences between the companies also take some time.

But we, as a management, are very happy and satisfied with this acquisition and very bullish about the company and believe that we made a good acquisition. Again, it’s a long term play, and we should judge this acquisition a few years from now. But we’re definitely bullish about this acquisition.

Rick Schafer, Semiconductor Analyst, Oppenheimer: And should we think about Acronym gross margin as a as a system or subsystems company? You know? So in terms of does it skew more towards your auto business in terms of gross margin profile long term, or does it skew more towards your pro AV sort of sort of gross margin profile?

Guy Nathanson, CFO, Valens: So I need to be very careful about the answering because we did not disclose this information, but I would say that the gross margin are in line with the our strategy.

Rick Schafer, Semiconductor Analyst, Oppenheimer: Okay. Okay. Fair enough. On that topic, and it’s a question I I’ve never asked you, but I you know, you’ve had you had a great slide up there that showed the different products, products, the different chips from the lens. And, know, it begs the question, especially when I’m talking to the CFO, you know, it just seems like there’s the potential, you know, to give you a lot of leverage as a CFO from on that r and d line.

So maybe a way to ask the question is, you know, how much have you ever looked at how much r and d reuse you’re able to to, you know, to to squeeze out of the model?

Guy Nathanson, CFO, Valens: Yes. So I think that the r and d today is in a if if we we we take all the tasks that, we have currently in the r and d versus and opportunities that we have in the future, versus what we spend today for r and d, it looks reasonable. You need to remember that any design win of automotive requires a lot of support, after you have the chip because you always need to develop specific software sometimes for the specific customer and supporting hardware and the other related items and support the customers in any question or challenges that you have. In automotive, there are many tests that you need to go through, many evaluation tests that you need to go through, and r and d is required for any single evaluation process, definitely in automotive. And also in other areas, for example, we have started a new market, the machine vision, and that requires a lot of r and d efforts in the software, in the hardware.

Even if you have the chips, still you cannot sell the chips stand alone. You always need to sell the chip plus other elements around, like software, hardware, and so on. So this requires a lot of r and d investment. I would like to remind you that in 2023, we had significant reduction in the headcount of the company, and we reduced significantly the operating expenses and specifically also the r and d expenses. And we feel that at this stage, the r and d is okay versus all the challenges that we have.

In semiconductor companies, you always invest the r and d today, and you generate the revenue in two, three years because it’s always a delay because of the design win cycle. And this is a special this is a a real issue also in Valens. For example, in automotive, evaluation process and design win can take almost five years in which you cannot see you will not generate a revenue. But then there is a lot of stickiness in the years after, and you can generate revenue for many years thereafter. So this is a these are challenging years before we generate revenue from machine vision and from automotive, but we do need to spend the r and d.

But this is investment for the future, and we show that we can generate significant amount of revenue in next few years. And then, it will be a good ROI on this investment.

Rick Schafer, Semiconductor Analyst, Oppenheimer: No. Thanks for all that color, guy. And I’m trying to be cognizant of time. I I might have time for maybe one more question, if that’s okay. And it it’s on auto since you just mentioned.

I mean, you know, I think we all understand that the auto segment is is going through some challenges the last couple of years, you know, just as a segment, right, just as a market. And you guys have the VA 7,000 trying to penetrate that market. So I’m trying to understand what impact has just a slower auto market had on those and I know these are long design cycles, as you mentioned. So what impact has it had, if any, on the level of engagement, the sense of urgency amongst your OEM or Tier one customers? I’m just trying to understand that that market a little better and and and sort of when we should start thinking about VA 7,000 maybe seeing a little a little ramp.

Guy Nathanson, CFO, Valens: Yes. So the our advantage in with the VA 7,000 is mainly on the advanced ADAS, where you need a high resolution camera. And this is where we win knockouts, our ability to support high resolution camera, our ability to support capacity, our ability to handle electromagnetic interference, which are become critical in the more advanced AIDA systems when it is real safety system. This is where we win in knockout. Today, in this year, it’s not there yet.

We expect full deployment of the advanced ADAS that where we can reflect our relative advantage in ’28, ’29, and beyond. So this is where we have a real advantage. I can tell you that we’ve seen many programs are being that are being delayed by the OEMs right now. For example, we heard things like, hey. Our revenues this year are declining, so we would like to postpone the plans for the new ADAS system for ’28, for ’29, and beyond because there is no sense of urgency.

This kind of statements we hear from the OEMs all the time. On the other hand, everybody do appreciate our technology. The engagement we have with Mobileye is an evidence to our technology. Mobileye is a market leader, technology leader. They would not engage with us, a small company, relatively small company, if they would not feel that we have real chances to win knockout in most of the, these design wins.

We already been able, to win the first three design wins. We hope that we will be able to win more in the future. We’re currently in multiple evolution process with different OEMs all over with Mobilite and also with other companies as well. And but, again, it’s a long term play. We expect to see initial revenues in ’27, ramping up ’28, ’29, full ramp up by ’30 because this is where we will have the most significant advantage.

However, you mentioned the name 7,000, and the and the 7,000 chip found to be a very interesting solution for other industries as well. For example, the machine vision. The machine vision is is a very, is very relevant for the 7,000 because of the same features in automotive, small form factor, low power consumption, CSI two interface, and other elements, which makes it a perfect fit for machine vision applications. So we opened a new vertical for this chip beside of automotive, and the same in the medical, in the single use endoscopy. The same chip is also relevant for this model as well.

Again, each of these verticals, we need to develop software and other and other elements in order to be in the market, but the chip as a chip is relevant for this market as well. So to summarize, we expect ramping up of the 7,000 starting on ’27 and beyond, we are very bullish about this about this chip.

Rick Schafer, Semiconductor Analyst, Oppenheimer: Sounds like good r and d reuse to me, guys. So, anyway, it’s great seeing you. That’s got us right on time. So it’s great to see you. I really appreciate you, you carving up the time, and I enjoyed our enjoyed our conversation today.

Thanks a lot.

Guy Nathanson, CFO, Valens: Thank you very much. Thank you. Take care. Bye bye. Bye bye.

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