Q4 2023 Valens Semiconductor Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. The conference will begin shortly. Good morning.
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Yoni: My name is Yoni, and I will be your conference operator today. At this time, I would like to welcome everyone to Valens Semiconductor's fourth quarter and full year 2023 earnings conference call and webcast. All participant lines have been placed in a listen-only mode.
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Yoni: Opening remarks by Valens Semiconductor management will be followed by a question and answer session. I will now turn the call over to Daphna Golden, Vice President of Investor Relations for Valens Semiconductor. Please go ahead.
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[noise], ladies and gentlemen, thank you for standing by the conference will begin shortly.
Daphna Golden: Thank you and welcome everyone to Valens Semiconductors' fourth quarter and full year 2023 earnings call. With me today are Gideon Bensley, Chief Executive Officer, and Guy Nathanzon, Chief Financial Officer. Earlier today, we issued a press release that is available on the investor relations section of our website under investors.valens.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. Please refer to our annual report on Form 20-F filed with the SEC earlier today 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.
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Good morning, My name is Jani and I will be your conference operator today at this time I would like to welcome everyone to the lengths Semiconductor's fourth quarter and full year 2023 earnings conference call and webcast.
All participant lines have been placed in a listen only mode.
Opening remarks by by length semiconductor management will be followed by a question and answer session.
I will now turn the call over to Doppler Golden Vice President of Investor Relations for violence semiconductor. Please go ahead.
And welcome everyone to the lung semiconductor's fourth quarter and full year 2023 earnings call with me today are getting the best way, Chief Executive Officer, and Guy Nicer Chief Financial Officer.
Earlier today, we issued a press release that is available on the Investor Relations section of our website under Investor Dot one dot com.
Daphna Golden: 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 reconciliations of these metrics within our earnings. In the coming weeks, we will attend the annual Roth MKM conference in Dana Point, California. If you're interested in meeting with us, please email me at investors at valens.com. With that, I will now turn the call over to Gideon.
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 earlier today 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.
Gideon Y. Ben: Thank you, Daphna. Hello everyone, and thank you for joining the Valens Semiconductor fourth quarter and full year 2023 earnings call. I am joined today by Guy Nathanzon, our new Chief Financial Officer. Guy will play a key role in progressing the Valens Semiconductor High-Performance Strategy and its execution. Guy has more than 20 years of executive leadership experience with U.S.-licensed and private companies in the semiconductor, medical imaging, and aviation technology sectors as CFOs with companies including ProVigent, Altera Semiconductor, Touch Technologies, and Scopula. We are excited to welcome Guy to our executive team and glad he is here today for our earnings call. I also want to thank Yael Rosenberg for stepping in as our interim CFO for the past six months. Yael is working closely with Guy and will continue to manage all aspects of our finance department as VP of Finance.
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 reconciliations of these metrics within our earnings release.
In the coming weeks, we will attend the annual Roth M Cam contract in Dana point, California.
If you're interested in meeting with US. Please email me at investors <unk> com with that I will now turn the call over to either.
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Everyone. Thank you for joining the Berlin semiconductor fourth quarter and full year 2023 earnings call.
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Gideon Y. Ben: As you all know, the past year has been challenging for the semiconductor industry, largely due to macroeconomic headwinds, including customer inventory levels, high interest rates, and inflation. Against this backdrop, at Valens Semiconductor, we continue to expand our engagement and partnerships across the various verticals, enhance our innovative high-performance connectivity offerings, and improve the visibility of our technology. We are pleased to report that both fourth-quarter and four-year revenues were at the top end of our guidance range, at $21.9 million and $84.2 million. Automotive revenue reached new highs and accounted for more than 30% of total revenues in 2020. None got gross margin for the 4th quarter, and the 4-year came in at 63.1% and 63.9%, respectively, and Justin Eby Duff was $2.2 million for the fourth quarter and a loss of $10.3 million for the full year, substantially better than our guidance.
Fearful four to five six months.
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If you want to know the fast charging for the semiconductor industry.
And of course, we're always headwinds, including customer human liver heightened interest rates and inflation.
Mike Malone for nickel got don't be confused with the Springer, we're engaged with and partnerships across the volumes there because I'm still in Hangzhou work, you know very simpatico.
With your offerings.
Bruce.
Three of our technology.
New stores bolt with both fourth quarter and full year revenues were in adult pants off our guidance range of $21 $9 million and $84 2 million respectively.
So most of the revenue reached new highs in the call.
For more than 30% of software revenue in 2023.
non-GAAP gross margin for the fourth quarter and the full year Kerry.
Three 1%.
63, 9% respectively.
Adjusted EBITDA was two point do we get it all out.
For the fourth quarter.
Loss of $10 3 billion Doyle for the for your subscription he picks up in our guidance.
Gideon Y. Ben: We entered 2024 with a strong balance sheet, with $142 million of cash and cash equivalents. Valens Semiconductor's robust balance sheet allows us to continue investing in innovation and pursue long-term growth opportunities as we overcome this headwind. Looking ahead, I am confident that Valens Semiconductor is well-positioned with a highly relevant and compelling set of solutions to address customer demand as we seek market-stable returns. For example, the advantages of our technology make it an optimal connectivity solution to support the increasing need for AI-based applications in robust connectivity solutions that allow the distribution of ever-increasing data.
Until 2024, with a strong balance sheet with $144 million.
Okay.
Semiconductor robust balance sheet allows us to continue investing in innovation efforts, you know Karen Rosenberger with you all.
These headwinds.
Looking ahead I'm confident.
We conduct them is worth position, which could hardly Richard Buxton converging physical solutions to address customer demand as we see market headwinds.
For example, the blockage is a perfect body, Mexico upstream on the corner.
So for them to support the increasing need for AI based application.
Robust connectivity solutions.
All of our distribution of ever increasing data.
Gideon Y. Ben: Now, let me turn to our performance and the trends we are seeing in the markets we serve. Starting with audio video, while demand for the second half of 2023 has been challenging, I remain excited. Our offering is designed to benefit from positive long-term trends in the video conferencing, education, industrial, and medical imaging sectors, among others. As more and more corporations are implementing return-to-office policies, they will need to invest in their video conferencing platforms to redefine the hybrid work environment. The installation potential of video is approximately 100 million conference rooms and classrooms worldwide. However, the penetration level is very low; it's about 10% or so, according to industry analysts.
Listen yourselves Oracle for months and the short term you'll see in the markets we serve.
Maybe just audio video was demand.
On top of 423 has been challenging I remain excited.
Our offering is designed to benefit from the positive long term trends in the video conferencing education industrial work in Mexico. When do you expect all of them all of the others.
More and more corporations or implementing repair for August 22, and when you're doing for you there could be just one for two.
So really part of the highest was worse environment.
The installed capacity of approximately 200 million corporate children across the worldwide.
The penetration level is very low.
For central fill according to industry.
Gideon Y. Ben: We believe it's only a matter of time before we see widespread demand from companies for connectivity solutions like ours that offer high bandwidth quality, easy installation, and low total cost of ownership. To this point, the CEO of Logitech, our customer partner, recently commented that the term "indigent conferencing" is a no-no. He also said that if you look out 10 years, it makes perfect sense that all of Conor Fraser's rooms will be video-enabled. I obviously agree with this view of the video conferencing market, which means there is a significant opportunity for Valens Semiconductor. Our offering is increasingly relevant for all types of meeting rooms, from large corporate boardrooms to small huddle rooms and small home office setups known as SOPs. In 2023, we will introduce a very exciting and innovative product, our USB 3.2 extension, the DS6320Q. With the introduction of this groundbreaking product, Valens Semiconductor addresses the most prominent industry pain points. We provide a high-performance single-chip solution for multi-gig connectivity for distances up to 100 meters or 328 feet over simple category copper cables.
We believe it's only a mixture of started before we see widespread demand from companies portfolio and solutions like ours, it's over a high prevalence Boise ease of installation and lower total cost of ownership.
Two good points the field logistics, our customer partner Richard's requirement.
The song and video conferencing is enormous.
He also said if you look out 10 years, you can expect that order corner persons rules would be video enabled.
I, obviously agree with this view.
On the video conferencing market.
I mean, there is a significant opportunity for semi conductor.
Our offering is increasing to be ready for all types of meeting rooms from large corporates all homes to smaller Hoffman at home, there's more poultry offerings pick up snow soul.
In 'twenty to 'twenty, three we introduced a very exciting and innovative products, our USB three <unk> joint venture.
Six Q3 'twenty keepsakes.
We've been production of two strong braking products.
Doctors are driven the most prominent industry pain points, we provide for high performance solution for multi year productivity for Victor here.
Well 328 feet overseas carpet volume corporate people, Jonathan is going to be your forecasting U S industry expansion opens up New York, Georgia power semiconductor in the audio video market for example.
Gideon Y. Ben: Just as with video conferencing, the USB 3 extension opens up new opportunities for Valens Semiconductor in the audio-video market. For example, in the industrial vertical, we can expand our penetration to address the demand for high bandwidth and resilience required by AI-based computer vision. Due to the growing use of high-bandwidth USB peripherals and the inherent limitation of connectivity length, the industry has been seeking a professional-grade extension solution.
Because we could expand the work penetration towards risk the demand for high bandwidth and resilience required by AI based computer vision.
Due to the growing use of heartburn, who used to be bearing fruit.
Every permutation of collectivity led the industry has been a professional with great extinctions and ocean.
Gideon Y. Ben: Valens Semiconductor has identified this growing requirement in video conferencing, IT, industrial, and medical applications. We are receiving exceptional feedback from our customers on this newly introduced chipset, and it was a major hit at the Consumer Electronics Show in Las Vegas and at Integrated Systems Europe in Barcelona, the world's largest audio-visual trade show. And last month, we won two more Distinguished Awards for the VS6320 at ISE, the Commercial Integrators, T&T Top Technology Awards, and AV Technology Magazine Best of Shows. Momentum around the VF6320 is strong, with dozens of products under development by Valens Semiconductor customers, a dozen of which were introduced at IIT Bombay. Products introduced range from point-to-point extension between cameras and computers, USB hub, and switch extensions, enabling long-range connectivity between multiple USB cameras, video conferencing, touch screen control, panels, and PCs. We saw exceptional enthusiasm around VF6320 chipsets embedded into cameras, which will eliminate the need to use external extension box builds and dedicated power supplies. This means much faster and simpler installation of the video file printing system at a lower total cost.
Congrats on a busy time.
The only requirement and videoconferencing.
Industrial and medical applications.
We are receiving exceptional feedback from our customers on these newly introduced chipset and it wasn't a major heat is a consumer and a strong showing that they've got.
Integrated systems Europe in Barcelona, the worlds largest automobile differential.
Are you asking for through 'twenty, one 'twenty 'twenty four innovation award honoree in the embedded technology category for Oscar News design and engineering as the first market chips will not sure for professional grade extension of USB three <unk>.
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The customer is starting off which were introduced.
Products introduced range from point to point expansion between Colorado Computer USB Hopkins switch expansion, enabling language connectivity between multiple USB, Colorado VP of corporate tax critical partners and computers.
We saw exceptional I suppose you're asking the wrong VX six districts one for Q2.
Get into Colorado.
To meet the needs to use external expansion boxer and dedicated power supply.
This means much heartburn and solicitation of bids you're forecasting to be at a lower total cost. We believe that this new startup based in HIFU, Poland, two actually three expansion, we'd be talking diesel requirements in the industry.
Gideon Y. Ben: We believe that this new startup of built-in high-performance USB 3.0 extension will become a default requirement in the industry. Another innovative product concept introduced by our customer was extended documentation. Combining Valens USB 3.0 extension technology with the docking technology provides unparalleled, cost-efficient, and easy-to-install hardware.
And not only innovative product concepts introduced by our customer what they extended stuffing station.
Combining bananas.
Fiction technology with the docking technology provide an all in cost efficient and easy to install carbon rules this wouldn't Nathan.
Gideon Y. Ben: This will enable acceleration of the adoption of video conferencing in unequipped pairs of video cameras of other rooms. These are all examples of how Valens Semiconductor is once again setting standards and transforming the industry. We expect revenues from the BS 6320 to begin ramping up in the second half of 2024 and believe that Valens Semiconductor will capture a substantial share of this largely untapped and growing market opportunity in the coming years. We are also targeting industrial applications with the USB 3.0 extension chipset and are extremely excited about this opportunity as USB 3.0 brings benefits to factory automation, which heavily relies on machine vision that increasingly utilizes AI. These benefits include an easy and cost-effective replacement of partial cables and lower latency and GDC.
The adoption of video conferencing, and unequipped painful when there's a partner with visa.
These are all examples of how well their semiconductor is once again.
Standup and transforming the industry, we expect revenues broker peers since we swiftly to begin ramping up in the second half of 'twenty 'twenty, four and believed it but their spending.
The conductor we capture a substantial share of this largely untapped and growing market opportunity in the coming years.
We are also targeting industrial applications with the U S pension chipset.
Extremely excited about this opportunity, it's usually three brings benefits to factual information, which heavily relied on machine vision, that's increasingly utilizes AI.
These benefits included.
Cost effectively pay for it.
And people and lower latency and jitter.
Gideon Y. Ben: The VF6320 is a game changer. It solves connectivity challenges of the current solutions as it uniquely provides the ideal combination of multi-gigabit bandwidth extensions, long reach, and resilience with a single chip on each end. All this is done at substantially lower cost. While the sales cycle in the industrial market tends to be lengthy, it provides a long-term and extremely sticky runway. Another revolving trend is multi-camera applications, which are suitable for video conferencing and provide an enhanced meeting experience. Multi-camera applications are also relevant for industrial machine vehicles.
63 square feet is a game changer.
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This combination of multi gig bandwidth extension.
And with me here with a single chip don't each area all of the stomach is substantially in the workforce.
Why is it feels like it's in the industrial market tends to be lengthy each provide long term and extremely good run away and not in resolving the trend is it won't be camera applications, which are suitable for video poker and provides.
We can basically be more to come or applications are also relevant for industrial machine vision.
Gideon Y. Ben: Commonly used remote communication platforms are increasingly integrating AI-based decision-making features that select the best view of audio of in-room participants from multiple cameras and audio sources, increasing the potential quality, clarity, and resolution of the video and audio streams in the meeting, enabling better remote communication and collaboration. Collectivity Solutions, enabling this evolution of AI-based applications, positions us to capture growing business opportunities. For example, in 2023, we announced a collaboration with IPH Technology, a Taiwan-based AI image processing company, to bring a 360-degree multi-camera video conferencing solution to market. This video conferencing solution is based on our automotive-grade VA7000. Last month, iFiction announced its plans to introduce an AI-enhanced multi-channel surround-view monitoring system for the automotive industry, which is also based on our VA-7000 High Performance Automotive Productivity Solution.
Use remote communications platform are increasingly integrating AI based decision making features they selected the best view.
Ingram participates to promote it.
In all your filter increases the potential quality clarity and resolution.
With all the stream in the meeting and maybe Victor remote communication and collaboration.
Well there is a series called basketball sort of if you could give some movement.
Evolution of AI based application are positioning us to capture growing business opportunities for.
For example in 2023, we announced a call a brake systems outreach technology and one with AI image processing company to breathe is 360 degree won't become a videoconferencing solution to market.
Video conferencing solution based on our automotive brake Inc.
7000.
Last month I picture in all its different than it is to introduce it.
Uh huh won't be Chinese they're wrong, you've already started to be felt for the automotive industry, which is also one of our B 7000 high performance automotive.
These collaborations demonstrate our vision.
Gideon Y. Ben: This collaboration demonstrates our vision for a holistic strategy that leverages Valens Semiconductor Core Technology to power cross-industry innovation. Talking about automotive, we have continued to make considerable progress in our automotive business, and our commercial VA6000 chipsets contributed to a record level of automotive revenues in 2020. Our estimated 6,000 chips have been used in infotainment and telematics systems in Mercedes-Benz cars for a number of years.
For a holistic strategy that leverages the latest 74 core technology to empower cross industry innovation.
The bulk of the market.
We have continued to make considerable progress in our automotive business and our commercial vehicle and keep that contributed to a record level of automotive revenues in 2021.
What's the message to be 6000 ships had been juice in there.
Payments into the market. So you can get a Mercedes Benz cars for a number of years.
Gideon Y. Ben: 2023 was our first full year of selling our chipsets into a broad range of autonomous-based models, F, C, and E class series, as well as our EV models. While the automotive sector is experiencing a significant downturn, pointing to weaker demand as well as slower decision-making around new technology adoption, I am encouraged by the interest we see in our VA7000 NIPI A5 chipset. We have continued to make progress with various evaluation processes that we are participating in and have expanded our pipeline of opportunities. In addition to the excellent electromagnetic compatibility known as EMC immunity tests we passed in Japan by Jasper earlier in 2023, Valens Semiconductor technology was also validated by leading European labs, at the request of leading automotive OEMs who are evaluating our technology. While this process is next... As time goes by, the necessity of resilient collectivity provided by H5 will continue to grow.
2023 was our first full year upsetting over chipsets into a brokerage of the baseball game.
[laughter] eclipsed area, that's what ever easy mortgages, what is the automotive sector is experiencing.
Counter party to weaker demand.
Slower decision, making Iran. Just a clarity of adoption I am encouraged by the interest we see in our view.
7000, maybe eight.
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We have continued to make progress with volumes up regulation of processes, it's weird picking in and have expanded our pipeline of opportunities in it.
Nishu Sood.
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If they can request a leading automotive Oems who are evaluating the Arkansas.
It's one of its processes and legacy.
Time goes by the necessity of Brazilians point excuse me provided by 85, we continue to grow.
Gideon Y. Ben: Our technology is designed to provide seamless connectivity for the increasing number of self-driving infotainment systems in today's and future cars. This is an unstoppable trend, supported by content uplifted as regulatory and safety requirements are increasingly adopted, mostly for advanced driver assistance systems known as ADAS and other safety-related solutions. We expect to continue to make progress towards securing the first VA-7000 design week. In the meantime, we continue to advance our long-term prospects for ADAS and serology safety systems, positioning Valens Semiconductor as a top technology innovator in the automotive sector. So far in 2024, we have announced two important developments. First, we announced our partnership with Intel Foundry Services. ILS will fabricate the second generation of our A5 compliant chipsets for the automotive industry.
Alright.
Designed to provide significant activity for the Caribbean Central infotainment systems into.
Today's and future cars.
It's an unstoppable trend supported by the content offerings.
There's regulatory and safety requirements are increasingly adopted mostly for advanced driver assistance systems, known as Adas and other safety related solutions.
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In the meantime, we continue to advance our long term prospects for Asia Interrogative safety Seaspan positioning Valletta semiconductor is the topic of Arlington no broker in the automotive sector.
So far in 2024.
Two important developments first we announced a partnership with Intel boundaries.
Hi, Ashwin its publication the second generation of our ACI compliant chipsets for the automotive industry.
Gideon Y. Ben: In this ecosystem, an advanced processor will enable significant cost and power reductions for this chipset family while achieving the highest performance and robust EMC in units. We are extremely proud to have been recognized by Intel as an industry leader for developing one of the most advanced chipsets for automotive. Thorpen, Senior Vice President and General Manager of IPEX, said that one of their goals is to identify transformative technologies and harness Intel's breakthrough process technology and global ecosystems to accelerate innovation and unlock new opportunities for customers. She also said...
This ecosystem and advanced processor, we can Nathan significant corporate fall reductions for these ships at time of need while achieving the highest performance and.
E M. Seniority, we are extremely proud to have been recognized in the industry either for developing one of the most advanced chipsets for automotive and.
So what's that senior Vice President and general manager of life.
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It's one of their gourd ease towards victim quite transformative technology and.
Harlan.
The breakthrough process technology, and global ecosystem to accelerate innovation and unlock new opportunities for customers.
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Gideon Y. Ben: The Valens Semiconductor MIPI-A5 chipset is an obvious feat, a next-generation technology with the potential for broad market adoption that can help advance automotive performance and safety and further the market's vision for autonomous solutions. The second announcement made earlier this month was about another new connectivity chipset providing a robust solution to critical safety concerns and operational needs in the tracking industry. Valens Semiconductor's new VA-700R chipset will uniquely solve the lack of visibility for trucks on the highway by delivering an unparalleled combination of bandwidth and link distances for both round-view and rear-view visibility.
If I look at semiconductor Wednesday April six is an obvious speed and next generation technology with the potential for broad market adoption.
It's part of the multi performer and safety and further the market vision for autonomous solutions.
The second announcement made earlier this month was the vault and also your productivity. She said, providing a robust solution to critical safety concern and operational needs.
The trucking industry.
But let's semiconductors middle aged 700 arch would uniquely so the lack of visibility for trucks on the highways, but you should never read an unparalleled combination.
And linked to your senses for both the wrong view and revenue visibility.
Guy Nathanzon: This multi-gig connectivity infrastructure was designed with highway safety and tractor-trailers in mind and will address one of the most dangerous situations on our roads today, making them much safer. Based on the VA-7000, we developed the VA-700R chipset, which was introduced last month at Automotive World Japan, the largest automotive technology show in Japan. Even with the current headwinds in the automotive industry, we are excited about the progress we are making and can leverage our technology to capitalize on a growing set of opportunities in this multi-billion dollar market in the coming years. With that, I will turn the call over to Guy to discuss our financial performance in modeling. Thank you, Gideon.
Just wanted to get connectivity infrastructure was designed was titled safety and trucks, Australia in mind.
One of the most dangerous situations when a rule to be making them much safer.
Based on the 87000, we've developed several hundred chipset, which was introduced last month after what's important Japan, the largest automotive technology show in Japan.
Even with the current headwinds in automotive, where we're excited about the progress we are making and can never know what technology to capitalize on the growing set of opportunities and just what's your opinion solar market in the coming years when.
I will turn the call to guy to discuss our financial performance in more detail.
Thank you Lisa.
Guy Nathanzon: Hello everyone, I'm excited to be here today for my first training call at Valens Semiconductor. Over the past few weeks, since I joined Valens Semiconductor, I have met and engaged with a passionate, results-driven team. They look forward to the future success of our superior product offerings and are ready to move full steam ahead on executing our long-term strategy, regardless of the immediate environment. I'll begin with a review of the company's fourth quarter and full year 2023 results, and then turn to our guidance for Q1 2024 and what we expect for the first half of the year, starting with the quarterly results. Q4 2023 revenue reached $21.9 million, at the high end of our guidance range. This compares to revenues of $23.5 million in Q4 2022.
Hello, everyone I'm excited to be here today.
Look I think it's called Isabel and semiconductor.
Over the past few weeks since I joined.
Joins <unk> semiconductor.
And engage with a passionate and result driven teams.
Look forward to the future success of our superior product offerings and are ready to full steam ahead on executing our long term strategy, regardless of the immediate environment I'll begin with a review of the company's fourth quarter and full year 2023 results and then turn to our guidance for <unk>.
Q1, 'twenty 'twenty four and what we expect for the first half of the year.
We grew quarterly results.
Q4, 2023 revenues reached $21 9 million.
At the high end of our guidance range.
This compares to revenue of $23 $5 million in Q4 2022.
Guy Nathanzon: Q4 2023 gross profit was $13.5 million, and gross margin was 61.7% compared to gross profit of $60 million and gross margin of 68.3% in Q4 2022. The Non-Gap Growth Margin came in at 63.1%, this compared to 69.2% in Q4 2022. The year-over-year change in gross margin was mostly due to product mix, with a higher proportion of automotive revenue compared to our audio-video business, which has a much higher gross margin.
Q4, 'twenty three gross profit was $13 $5 million and gross margin was 61, 7% compared to gross profit of $60 million and gross margin of 68, 3% in Q4 2022.
For 2023, non-GAAP gross margin came in at 63, 1%.
This compared to 69, 2% in Q4 'twenty thing to do.
The year over year change in gross margin was mostly due to product mix with a higher proportion of automotive revenue compared to our audio video business, which has much higher gross margin.
Guy Nathanzon: Operating expenses in Q4 2023 totaled $15.3 million, significantly lower than $24.1 million in Q4 2022. I'd like to turn to analyzing the improvements achieved in OPEC. Research and development expenses were $8.6 million compared to $16.5 million in Q4 2022. Several factors contributed to substantially lower R&D expenses.
Operating expenses in Q4 of 2023 totaled $15 $3 million significantly lower than $24 $1 million in Q4 2022.
Electric.
Normalizing.
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Research and development expenses were $8 6 million.
Compared to $16 $5 million in Q4 2022.
Several factors contributed to substantially lower R&D expenses.
Guy Nathanzon: Last year, the company recorded expenses of $4.2 million associated with the development of our VA7000 chipset family, an essential step towards mass production. As Gideon mentioned, the VA-7000 is part of our vision for a holistic strategy that leverages Valens Semiconductor's core technology to power cross-industry innovation. The company also lowered R&D payroll expenses by approximately $2.1 million in line with the streamlining of our development platform. The quarterly payroll expenses were also positively impacted by $1.2 million due to lower bonuses and reserve duty refunds.
Last year, the company recorded expenses of $4 2 million or 40.
You did with the development of our V. Eight 7000 chipset family and essential step towards mass production as Gideon mentioned the V. Eight 7000 is.
Part of our vision forehead holistic strategy.
Just Berlin semiconductors core technology to power a cross industry innovation.
The company also lowered RMB payroll expenses by approximately $2 $1 million in line with the streamlining of our development platform.
The quarterly payroll expenses were also positively impacted by $1 2 million.
Due to lower bonuses and reserve duty refunds.
Guy Nathanzon: And finally, who benefited from a positive foreign exchange rate impact. FG&E expenses of $6.6 million were 13.5% lower compared to $7.7 million in Q4 2022. This was mainly due to lower payroll-related expenses. In Q4 2023, the company achieved a net income of $2.8 million, compared to a net loss of $7.3 million in Q4 2022, driven mainly by lower expenses. Adjusted EBDAP in Q4 2023 was substantially higher than our guidance at a record $2.2 million. The better-than-guidance adjusted EBDAL in Q4 2023 was achieved mainly due to lower op-ex. This compared to an adjusted EBIT dollar of $4.6 million in Q4 2022. Another notable achievement was the record gap net income per share of $0.03 in Q4 2023, which compares to a loss of $0.07 in Q4 2023. On a non-GAAP basis, net income per share reached a record of $0.06 per share in Q4 2023, 300% higher than the loss per share of $0.03 in Q4 2022.
And finally, we benefited from a positive foreign exchange rate impact.
<unk> expenses of $6 6 million daus were $18, 5% lower compared to $7 $7 million. In Q4 2022. This was mainly due to lower payroll related expenses.
In Q4 2023, the company achieved GAAP net income of $2 $8 million compared to a net loss of $7 3 million in Q4 2022.
Driven mainly by lower expenses.
Adjusted EBITDA in Q4 2023.
Eventually higher than our guidance at a record $2 $2 million.
The better than guidance adjusted EBITDA in Q4, 2023 was achieved mainly due to lower opex. These.
This compared to an adjusted EBITDA loss of $4 $6 million in Q4 2020.
Another notable achievement was the record GAAP net income per share of three cents in Q4, 2023, which compares to a loss of <unk>.
Since in Q4 2020.
On a non-GAAP basis net income per share reached a record of six cents per share in Q4 2023.
100% higher than the loss per share of three cents in Q4.
Guy Nathanzon: Concluding the Q4 commentary on this positive note, I will now turn to the full year 2023 results. Total revenues for the year 2023 were at the top end of our guidance, reaching $84.2 million compared to $19.7 million in 2022. Revenue from the order video business was $57.4 million, compared to $74.5 million in 2022, if customers walked through accessing inventory, which slowed the pace of orders. Automotive's biggest revenue rose to a record $26.8 million, up 65.5% from $16.2 million in 2022. I'd like to highlight that 2023 marked the first full year in which Valens Semiconductor's high-performance connectivity chipsets were implemented in a broad range of Mercedes-Benz car models. Gap gross profit was $52.6 million, and gross margin was 62.5% for the full year 2023, compared to $63.4 million and 69.9% in 2021. The non-GAP growth margin was 63.9% for the full year 2023, compared to 70.7% in 2020. The change in gross profit mainly resulted from the lower number of units.
Concluding the Q4 commentary on this positive mode.
Now turn to the full year 2023 result, both of them.
Revenue for the year 2023, where the top end of our guidance, reaching $84 $2 million compared to $97 million in 2022.
Revenue from the audio and video business.
Seven $4 million compared to $74 $5 million in 2022.
Customers work through excess inventory, which slows the pace of folding.
I don't know if its biggest revenue rose to a record $26 $8 million up 60.
Five 5% from $16 2 million in 2022.
I'd like to highlight the 2023 marks the first full year, and which are a little semiconductors high performance connectivity chipsets were implemented in a broad range of Mercedes Benz car model.
GAAP gross profit was $52 $6 million and gross margin was 62, 5% for the full year of 2023 compared to $63 4 million and 69, 9% in 2022.
non-GAAP gross margin was 63, 9% for the full year 2023 compared to 77% in 2020.
Change in gross profit mainly resulted from the lower number of units shipped.
Guy Nathanzon: In parallel, the percentage of revenues from automotive increased substantially to 31.8% in 2023, up from 17.8% in 2022. These mixed shifts from audio-video to automotive had an impact, as audio-video has higher margins. Full year 2023 operating expenses were lower at $79.5 million compared to $91.8 million in 2022. The year-over-year decrease of $12.3 million in OPEX was driven by several factors.
In parallel the percentage of revenue from automotive.
<unk> substantially to 31, 8% in 2023.
Up from 17, 8% in 2022.
This mix shift from audio video to automotive had an impact as audio video has higher margins.
Full year 2023, operating expenses were lower at $79 5 million compared to $91 $8 million in 2022.
The year over year decrease of $12 3 million in Opex was driven by several factors.
Guy Nathanzon: R&D expenses decreased by approximately $10 million and drove most of the year-over-year improvement. R&D payroll expenses were $6.1 million lower. They were impacted by the efficiency plan we deployed by the end of Q3, lower bonuses and reserve-duty refunds, and the positive effects of exchange rates of the Israeli currency versus U.S. dollars. The other contributing factor was lower R&D spend in 2023, given the significant investment made in 2022 in our V8 7000 chipset family. $4.2 million investment in a production-manufacturing phase to target new automotive designers. FG&A expenses decreased by 2.2 million dollars year-over-year, mainly due to a reduction in D&O insurance premiums; in 2023, it recorded finance income of $5.6 million compared to expenses of $1.8 million in 2022.
R&D expenses decreased by approximately $10 million and drove most of the year over year improvement.
R&D expenses were $6 $1 million lower they were impacted by the efficiency plan. We deployed by the end of Q3, lower bonuses and reserve due to refunds and the positive effect of exchange rates.
Really currencies versus the U S dollar.
The other contributing factor was lower R&D spend in 2023, given the significant investment maybe in 2022 email, we're re aged 7000 chipset.
$4 2 million cooler investments you know production manufacturing phase two targets, new automotive design wins.
SG&A expenses decreased by $2 $2 million year over year, mainly due to reduction in D&O insurance premiums.
In 'twenty three recorded finance income.
$5 6 million compared to expenses of.
One 8 million barrels in 2027.
Guy Nathanzon: The $7.4 million increase was mostly driven by our strong cash position and a foreign currency exchange rate impact of $3.3 million. More substantial was Valens' robust cash position, which enabled us to benefit from the rise in interest rates on the deposits we hold. Interest income in 2023 reached $6.7 million, up from $2.3 million in 2022.
Seven 4 million dollar increase was mostly driven by our strong cash position and foreign currency exchange rate impact of $3 3 million.
Most of the pension was Valencian robust cash position.
And they've begun to benefit from the rise in interest rates on the deposits we hope.
Interest income in 2023 reached $6 $7 million up from $2 3 million daus.
'twenty two.
Moving to net loss and adjusted EBITDA GAAP net loss for the full year 2023 improved to $19 $7 million from $27 $7 million in 2022.
Guy Nathanzon: Moving to net loss and adversity, the net loss for the full year 2023 improved to $19.7 million from $27.7 million in 2022. The adjusted EB dollar for the full year 2023 was $10.3 million, an improvement compared to $14.9 million in 2022 and is substantially higher than the guidance.
Adjusted EBITDA loss for the full year 2023, with pinpoint $3 million, an improvement compared to $14 9 million in 2020, and its substantially higher than the guidance.
Guy Nathanzon: Gap net loss per share for 2023 was $0.19; it was better than $0.28 in 2022. Non-gap loss per share for 2023 was $0.05; it was better than $0.17 in 2022. Now turning to the balance sheet. Ensuring a robust balance sheet enables us to implement our strategy, finalize our growth plan, and puts us on a path toward achieving sustainable profitability. Cash, cash equivalents, and short-term deposits totaled $142 million at the end of December 2023 compared to $142.7 million at the end of September 2023 and $148.4 million at the end of December 2022. We continued to carefully manage our inventories and have effectively reduced them throughout the years.
GAAP net loss per share for 2023 was 19 things it was better than 28 cents in 2022.
non-GAAP loss per share for 2023 with five things you feel better than 17% in 2022.
Now turning to the balance sheet.
Ensuring a robust balance sheet and ended up to implement our strategy final called growth plans and puts us on a path towards achieving sustainable profitability.
Cash cash equivalents and short term deposits totaled $142 million at the end of December 2023, compared to $842 $7 million at the end of September 2023, and 848 $4 million at the end of.
December 2022.
We continued to carefully manage our inventories and then effectively reduce them throughout the year.
As of the end of 2023, our inventory balance.
$13 $8 million down from $16 $9 million at the end of September 2023, and down from $23 $8 million and be end of 2022.
Guy Nathanzon: As of the end of 2023, our inventory balance was $13.8 million, down from $16.9 million at the end of September 2023 and down from $23.8 million at the end of 2020. Now, let's move to our outlook. As with the rest of the semiconductor industry, Valens Semiconductor continues to encounter challenging macroeconomic conditions and shorter lead times, which influence ordering and inventory consumption patterns. Our Q1 2024 guidance is as follows. We now expect Q1 revenue to be in the range of $11 to $11.2 million. We expect gross margin to be in the range of 52.2% to 53%. A jersey de biga loss is expected to range between $9.7 and $9.1 million.
Now, let's move to our outlook.
With the rest of the semiconductor industry, but semiconductor continue to encounter challenging macroeconomic conditions and shorter lead times, which influence ordering and inventory consumption patterns are.
Our Q1 2024 guidance is as follows.
We now expect Q1 revenue to be in the range of 11 to 11 $2 million.
We expect gross margin to be in the range of 52, 2% to 53%.
Adjusted EBITDA is expected to range between a loss of $9 seven and nine $1 million.
The current environment is also impacting our visibility and is likely to lead to a challenging first half.
As such Q2, 'twenty 'twenty four revenues are expected to be relatively flat compared to Q1 'twenty 'twenty four.
I would like to reiterate.
Looking ahead, the length semiconductor growth prospects for the medium and longer term remain positive.
Guy Nathanzon: The current environment is also impacting our visibility and is likely to lead to a challenging first half. As such, Q2 2024 revenues are expected to be relatively flat compared to Q1 2025. I would like to reiterate... Looking ahead, Valens Semiconductor's growth prospects for the medium and long-term remain positive. Once the industry recovers, we will be ready to continue executing our growth plan with an even broader portfolio. Our extended portfolio is designed to penetrate untapped markets and verticals and enable the evolution of AI-based applications. I'll now turn the call back to Gideon for his closing remarks before opening the call for Q&A. Thank you, Guy.
Once the industry recovers, we will be ready to continue executing our growth plan with an even broader portfolio.
Extended portfolio is designed to penetrate the untapped markets and verticals and then remember the solution for AI based applications now.
I'll turn the call back to be doing for his closing remarks before opening the call for Q&A.
We remain focused on execution and are capitalizing on the great opportunities. We see ahead in the market that offered the best growth opportunities for there to be conducted in 'twenty 'twenty four we will continue to invest in it.
Gideon Y. Ben: We remain focused on execution and on capitalizing on the great opportunities we see ahead in the markets that offer the best growth opportunities for Valens Semiconductor. In 2024, we will continue to invest in an innovative and broad pipeline of connectivity solutions and opportunities, such as the DA7000 for automotive and audio video, the DA66320, our new USB 3.2 extension offering, and various AI-based applications. We are positioned to take advantage of market failings with a focus on delivering long-term sustainable value to our stakeholders.
Macy's and broad pipeline of products, if you could give some bookshelves everyone's looking.
It is such a big piece.
7000 brought from Washington audio video DSP to speak 20 or unusual three three protection offering invited AI based application.
We are positioned to take advantage of market families with their focus on delivering long term sustainable value to our stakeholders.
The latest semiconductor offering the most innovative high performance connectivity infrastructure.
Most of the big box in the industry and we're honored to receive recognition but.
For developing one of the more advanced chipsets for ophthalmology.
We had over $50 million of innovation excellence in the semiconductor industry and the strong balance sheet with the cash necessary to expand market fluctuations.
Gideon Y. Ben: Valens Semiconductor offers the most innovative, high-performance connectivity solutions with the most advanced chipsets in the industry, and we were honored to receive recognition by IFS for developing one of the most advanced chipsets for automobiles. We have over 15 years of innovation and excellence in the semiconductor industry and a strong partnership with the cash necessary to withstand market fluctuations. Valens Semiconductor is the driving force behind technological innovations that make a tangible impact on people's lives, and with our chipsets already embedded in millions of products, we are not just setting standards; we are redefining them across industries. Before opening the floor for questions, I would like to take this opportunity to thank our employees.
Semiconductor is a driving force behind a technological innovation it can make.
Tangible impact on People's lives.
Sure.
And we get the product we're not just fixing startup we are redefining vary across the industry before opening the floor for questions I would like to take this opportunity to thank over employees you are the fourth driving semiconductor forward with your passion is <unk>.
<unk> unmatched innovative spirit and with that.
I would now open the call to your questions operator.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker Oakwood and then kind of a thing.
Handset before pressing the numbers.
Operator: You are the force driving Valens Semiconductor forward with your passion, dedication, and an unmatched innovative spirit. With that, I will now open the floor to your questions, Operator. Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers.
Please ask your question in a loud and clear voice your questions won't be called in the order. They are a seat please standby.
The first question is from Brian Dobson of Sheridan capital markets. Please go ahead.
Yeah. Thanks, very much for taking my question and congratulations on for CES Award this year.
So as you're thinking about growth for the year, where do you see pockets of strength relative weakness compared with 2023.
Yeah.
Thank you Brian for the question and that will come.
Operator: Please ask your questions in a loud and clear voice. Your questions will be answered in the order they are received. Please stand by.
We see this trend.
This is it.
As follows.
Brian H. Dobson: The first question is from Brian Dobson of Sheridan Capital Markets. Please go ahead. Yeah, thanks very much for taking my question. Congratulations on your CES award this year. So, as you were thinking about growth for the year, where do you see pockets of strength and relative weakness compared with 2023? Thank you, Brian, for the question, and welcome. We see the strengths and weaknesses as follows. Currently, we saw some of the softness of the industries in our ecosystem, and we still feel it. I believe and we hope that we are going out of this weakness by the second half of 2024.
Currently.
That was the softness.
The industries in our ecosystem that is still in the end.
Eric is we.
We still feel it I believe.
We hope that continues to grow we are going out of this say weakness by the second half of 'twenty 'twenty four and we finished we're very well positioned to execute growth plans.
Ah we're seeing currently in the market is a perfect audio video we believe the inventory consumption is in good progress.
And then automotive and the sector is experiencing.
I would say the cyclical downturn and slower decision making.
Gideon Y. Ben: We feel that we are very well positioned to execute growth plans. We're seeing that the market is first in audio-video. We believe inventory consumption is in good progress.
All of these technology adoption, yet we get involved in very very good with a combination of both been named Demonstratable advantage and.
Gideon Y. Ben: And in the automotive sector, the sector is experiencing, I would say, a typical downturn and slower decision-making around new technology adoption, yet we are getting, in parallel, very, very good recognition of the need, the demonstrable advantage, and we are retaining the hopefulness that our solution is the solution and that we eventually get what we're looking for. It's hard to predict the date, but the certainty about the uniqueness and the need of the market is, we feel, very strong. We also believe it will benefit from capturing new untapped markets with our USB 3.0 extension and the product that we just launched and got all those awards, the VS6320. It's a product we are very, very proud of, a very high-end product, very sophisticated technology for the use of a much broader market than we were in before. All in all, once the markets we serve recover, we are well positioned to execute our growth plan, and we are all prepared for that. So I hope I have answered you.
We are retaining the hopefulness that our solution is the solution and they will eventually.
And get to what we're looking for I E. We kept.
It's hard to predict.
But it is the certainty about the uniqueness and the.
Need in.
The market is is we feel very strongly.
And.
We also believe it will benefit from capturing new untapped markets, we saw our USB three extension.
The product is with Jack loans and small although.
All of those awards.
320 <unk>.
We're very very proud of it.
Very.
Very high end product is a very sophisticated technology.
For the use of.
And on the broader market, which we were before.
All in all once the markets we serve recover.
We are well positioned to execute our growth plan and we're all prepared for that so I hope.
I also deal.
Thank you.
Yeah very good thank you.
Yeah.
We will be 6000 chips.
Gideon Y. Ben: Thank you. Yeah, very good, thanks. And then you highlighted the full DA6000 chip set to Mercedes-Benz for using it in a wide range of its car offerings. Do you think that other automotive OEMs will see that as a taxed example of approval? And have you had conversations, you know, with other, call them household brands?
Maybe.
For use in a.
Wide swap.
Car offerings.
Yeah.
You bet.
Sanford approval.
You can reach us.
With other call it household brands.
So we used to these companies as well you know I'm not asking you to speak.
Gideon Y. Ben: about selling into those companies as well, and you know, I'm not asking you to specifically. We're focusing on the next generation, on the VA-7000, where we see a lot higher technological barrier and a lot more blunt need and demonstrable advantage on the market. So the VA-6000 is the product that entered us into the market and we believe it is a very important player here. And answering specifically about other customers, of course, we cannot, we cannot, discuss. I can just tell you that we see the VA 60,000 also in other markets than automotive.
I'll be quick.
We're focusing on the next generation under being 7000, where we see a low tire kicking rodriquez bar here and a lot more blunt need and demonstratable advantage on the market to build to be 6000 is the program that entered to the market and we'd be.
<unk> is a very important.
Player here.
I'm curious specifically about other customers of course, who cannot.
Okay.
Ill discuss I can just tell that are we seem to be a six E. S.
The 86000 also in other markets than the automotive.
Gideon Y. Ben: We have sales in industrial, we have sales in audio-video, and the V60,000 has a lot of influence in Valens. As I said, it's been introduced to the automotive industry. We have Mercedes, we have Stone Ridge, and we have other companies which are looking at it, which you cannot elaborate on, of course, at this stage. But as I said, it was the step to get into the big market, the VA7000, where we see the huge upside of totally different magnitudes. I would like to elaborate on one sentence here. If you look at the car, at the vehicle, how many of the links are symmetric? It would require 6,000 in the light, versus how many are non-symmetric, asymmetric, that we'd need to connect between a sensor like a radar or a camera to the ECU. And it's by far, by far more links.
And we have filled in industrial we are still in audio video and at least 60000 has Uh huh.
Inflows into balance et cetera can you tell us what the automotive we have very much said this we have and stoneridge and and and we have a there are.
Companies, which are looking at your release you cannot.
Elaborate a of course at this stage and but as I said it was the.
Step to get into the big market. The V. A 7000, where we see a huge upside in totally different magnitude I would like to elaborate one sentence here. If you look at the car and the vehicle how many of the links are symmetric it's would require 6000 the life versus how many are.
Our non symmetric asymmetric that we'd need to connect between same store like the radar or a camera to the ICU and it's by far by far more links and the auto the significance N V.
Gideon Y. Ben: And also the significance and the importance of those links and how the whole vehicle is fragile if those links are not perfect. So this is the way we see those two chips and the connection between them. So that's, I think, the summarized message. Yeah, very good.
The importance of the adult drinks.
And how the core vehicles is fragile if those rigs are not perfect. So this is a.
The way, we see be a those two chips.
N V a.
And then.
Connections between them.
So.
That's I think the summarizing my manifest.
Brian H. Dobson: That's helpful. Thank you. And then, could you share a little bit about, you know, potentially positive or constructive feedback you've received from the trucking industry regarding the DA7000 chip's ability to provide, call it, rear-view or surround-view capabilities for trucks? Well, the answer, the real answer that I cannot share, not because I do not have it, it's because we are, in some, I cannot share too much about it, but I say that we have We believe that it gives us opportunities.
Yeah very good that's helpful. Thank you and then could you share a little bit about.
Potentially pause in core constructive feedback you've received from the trucking use discrete regarding SBA 7000 chips ability to Dubai colleague rear view.
Do you.
Sure.
We are.
I'm sure the real answer that I cannot share not because they do not pattern.
It's because we are.
In some I cannot share too much about it but I would say that we have significant offshore.
Several hundred art.
We believe that it.
Gives us.
And.
It gives us opportunities I hope that in the future, we'll be able to share more at the moment I can say the following.
Gideon Y. Ben: I hope that in the future, we'll be able to share more. At the moment, I can say the following. The DA7000R is an industry-leading bandwidth and link distance and gives a solution for long-vehicle sensor connectivity that enables things that no one else can, like 4 gigabits of distance up to 40 meters, 130 feet, and this enables the long-distance vehicle, a full surround-view and ADAS, and it leverages the DA7000 chip set family for more. While, you know, the DA6000 is mainly for rear-view visibility in trucks or trailers, and the DA7000 gives the whole surround view for the long-vehicle market.
Or he is an industry leading bandwidth and.
These tests and gives us solution for noninvasive central connectivity that enables thing that no. One can like four gigabytes of data up to 40 meters 130 feet and they enable.
Below this vehicle.
Surround view and a duck.
And it's never going to be a 7000 chipset family.
Hum for four more while you know the basics is mainly for rare view visibility and tractor trailer and the V. Eight 7000 deals they're all surround view for a for a low vehicle.
<unk>.
If we didn't have the safety offering of trucking industry and it would be.
Gideon Y. Ben: It will enhance the safety offering of the trucking industry, and we believe it enables reducing the number of accidents that are because of either going backwards or having a blind spot while in different turns. A lot of them, and we have very thorough statistics about accidents with trucks. We believe we have given her a very serious solution, but about the process with trucks, I cannot elaborate now, but I hope I have answered you. Yeah, thanks. And just one final question... As far as your involvement in the school district in Florida, has that helped you further conversations with other school districts?
In April it enables decreasing.
Reducing the number of accidents that are because of either going backwards or having a blind spot while.
In different areas.
A lot of D and we have a very thorough statistics about accidents was trucks, we believe the deeper something very serious solution, but about the process with trucks I cannot I cannot.
Elaborate now, but I hope I didn't see you.
Yes.
Just one final question.
Yes.
As far as your you resolved we will distribute tomorrow.
And then how do you further conversations with other school districts, because we touched upon that on your last call.
Brian H. Dobson: I know we touched upon that on your last call. I'm sorry, I could, can you please repeat that? We don't understand it very well, can you please repeat the question? Yes, apologies. So, as far as your work with the Florida School District, has gaining a foothold there helped further discussions with other school districts that you may be speaking with?
Sorry, I could can you please repeat with us.
It was hard to hear not so clear can you. Please repeat the question.
Yes apologies.
So as far as your work with the Florida School districts is gaining a foothold there.
Further discussions with other school districts that you're making.
Gideon Y. Ben: I know we chatted about that briefly on the last call. Well, there are, again, it's like, in this kind of session, we cannot speak a lot about certain customers. I can say that our AEB activity is facing new opportunities, both in the school district and in the hybrid education, and it is something that we believe has a lot of upside for Valens in the future, and part of it is the hybrid education, which is actually part of what you just mentioned, the school district. It's an industry with its own mannerisms and own decision-making speed, and it's B2G, it's business to Thank you very much.
I know, we've chatted about that.
The last call.
There are the game, it's like we know in this kind of a sexual cannot speak a lot about it.
<unk>.
Certain customers I can say that our a V. A P. S T a.
Is the pricing and new opportunities both in May and the school district, both in a hybrid education in industrial.
And it is something that we believe.
Has a lot of upside for finance in the future.
Hum and part of it is the.
Hybrid education, which is actually part of what you just mentioned the school district.
It's an industry, which is one monitor wisdom and all in one app.
A decision, making speed and it's b to G. If the business to government, but we are also an offset here.
Thank you very much.
Yes.
Suji DeSilva: Thank you. The next question is from Suji DeSilva of Ross Capital. Please go ahead.
Thank you.
The next question is from Fujita Silva of Roth Capital. Please go ahead.
Suji DeSilva: Hi Gideon and Guy, welcome to the call. Best of luck in the new role here. Thank you. So, yes, the VS6220 sounds interesting here, Gideon. Can you talk about the AICV market opportunity, the surveillance opportunity for computer vision? That sounds very interesting and could be probably the largest opportunity, but I'm curious if that is the case and how your traction is there early in that market.
Hi, Julien and a guy welcome to the call are best of luck in her new role here. Okay. So yes.
Through 'twenty sounds interesting here Julien can you talk about the U K I C V market opportunity the.
Surveillance opportunity.
For computer vision that sounds very interesting and it could be probably the largest opportunity I'm curious.
If that is the case and how your traction is there early in that market.
Gideon Y. Ben: First, thank you very much to Gideon for the question, especially thank you, because I asked Daphna before, I wanted someone to ask me about AI, and therefore, I'm especially thankful this time. You know, AI, and my personal background is before Valens has been in AI for more than 20 years; AI requires a lot of data and is very accurate. Especially AI, which is untargeted, actually needs to learn itself And what we're doing, in the world of ADAS, the world of aliens requires a lot of data all the time, and I just want to be very concrete and down to earth. When speaking about compromising on beta, what is compromising on data? It's going, let's say we don't have enough bandwidth. Should we go from 30 to 24 frames per second? Should we go from 12 bits per pixel to 80 bits per pixel? And what does that mean?
First thank you very much for the question, especially thank you because.
Now before I wanted to I want to ask me about AI, and therefore, I'm, especially thankful at this time.
No.
And my personal big long before this isn't an AI for more than 20 years.
AI and required a lot of data and very accurate, especially.
And AI, which is I'm talking to actually U S.
Is that.
<unk> needs to know exactly the situations.
And.
What we're doing is expecting the word of asos.
It wasn't that doesn't require a lot of a lot of data all the time and I just want to be very concrete and don't do it.
When speaking about compromising on data.
What was compromising on data is growing let's say, we don't have enough Bandwidths show do we go from 30 to 24 frames per second children go from 12.
The pixel to HCP.
And what does this mean it means that it might not see the sport of the child is going to cross the street and 300 yards from us or because of the phone because if there is not enough color.
Gideon Y. Ben: It means that it might not see the foot of the child who's going to cross the street 300 yards from us, or because of the fog, there is not enough color depth to see the difference between red light and green light. And this is where the amount of data that is required becomes a lot more essential and important. Resilience of the link that takes all this data back from the camera to the ECU is becoming more and more essential because if you lose this link because of electromagnetic influence, the AI, the whole AI... might function less well than pre-AI systems. So, the AI requirement... For a lot of data and people, you know, when people start to speak about AI, they start to speak about big data.
To see the difference between the Red light Green light and this is where the amount of data that is required because become a lot more essentially is important.
<unk>.
Resilience of the link that takes all of these data back from the camera to the ECL.
As more and more efficient because if you lose this linked because of electromagnetic influence.
The AI the whole AI.
Mike a function less good than pre AI system, so the AI requirements.
For a lot of data and people.
When people start to speak about the AI. It is starting to pick up on big data. It came together because it is a very unique.
Gideon Y. Ben: It came together because AI has a very unique need for a lot of data, and this is where we are positioned. One last thing, when you move from a certain resolution to double the resolution and from a certain data bandwidth to double, the exposure to EMC is not doubled; it's exponentially higher. So the case of a car moving near a cellular antenna, near a truck, above a bridge, wherever you have a magnetic influence makes the whole link a lot more fragile, and the ADAS a lot less functional.
The unique needs of.
A lot of data and this is where were.
Where we are and positioned what do I think when you move from seven or so neutral to damage the resolution.
And from certain data bandwidth to double B explorer to EMC is no doubt, but it's exponentially higher so the a case of a car and moving you are sitting at around 10, a Nordic track about the bridge wherever wherever you have an electric.
And magnetic influenced make the whole link more Fraser I am also Asia.
Look it's functional so this is where AI and how valid is an AI in labor because of the need for more data and more resilient.
Suji DeSilva: So this is where AI and how Valens is an AI enabler because of the need for more data and a more resilient way to transfer the data in time. Okay, well that makes a lot of sense, Gideon. I appreciate that. In the 24 revenues versus 23, do you have a sense of what auto will be in the mix? And in the first half, is it weaker because of, into the cautious guide, because of inventory digestion?
To transfer did they take time.
Okay, no that makes a lot of Thanksgiving I appreciate that in the in the 'twenty four revenues.
Versus 23 do you have a sense of what order will be in the mix in the first half is weaker because of uncertainty into the cautious guidance because of an inventory digestion is that the impact on the first half runner.
Guy Nathanzon: Is that the impact on the first half for auto? Okay, thank you for your question. We've got a technical problem here. Can you repeat the question, please, one minute? Oh sure, yeah. Sure, I'm sorry.
Okay. Thank you for the question.
So.
<unk>.
Please.
We think.
We've seen that.
Eventually.
Yeah.
So.
So evidently the technical problem here.
Right.
Can you repeat the question. Please one.
Wondering if I'm sure yes.
Sure I'm sorry, so in the end.
Suji DeSilva: So, in the- I'm thinking of what the auto revenue mix would be in 24 versus the 30% you saw in 23 and if the first half of the year might be impacted by inventory corrections with, you know, perhaps recovering in the second half. Okay, so at this stage, we have kind of limited visibility into the first half of 2024 and all over 2024. This is why we would prefer this stage not to refer to the product mix between the 8V and the automotive, and I think that we've seen a significant ramp in the automotive between 22 and 23. I would not expect the same pace on the Mercedes-Benz design also into 24 because we are fully mapped. Currently, we will not provide any further information on any new design for the automotive industry. If we have something to announce, of course, we will. And one last question, perhaps, Gideon.
What the auto revenue mix will be in 24 versus the 30% we saw in 'twenty three.
The first half auto might be impacted by inventory corrections.
Perhaps recovering in the second half.
Okay. So as he said we are kind of limited.
And into the first half was 24 and all over 24 visit.
While we would prefer at this stage, what we refer to the product mix.
Between the a V and automotive.
And I think that's it.
We've seen.
The significant ramp in go to market between 'twenty two to 'twenty three I would not expect anything.
At the same pace is on the gross savings banks.
And a design also into 'twenty four.
We're fully ramped.
And.
Currently we would note that provide any further information on any new designs.
On the automotive.
It's something to do and often of course, we would.
Okay.
One last question, perhaps to get in.
Guy Nathanzon: With the partnership of Intel-IFS, I'm just curious what features of your chip, from a technical perspective, stood out to them to have them highlighted versus other chips. Well, of course, we cannot elaborate on the technical details of the chip. But I can say one thing.
The partnership eventual ISS I'm just curious what features of your chip.
Nickel perspective stood out to them to have them highlighted versus.
Versus other chips.
Well of course, we can also elaborate about the detail of both technical detail the cheap I can say one thing.
The essence of the land is a company that's a replace the full analog technology with carving out part of the analog and putting a DSP inside and and this puts us in a situation that unlike analog company, we benefit from the more advanced processes because.
Gideon Y. Ben: The essence of Valens is a company that replaces the full analog technology by carving out part of the analog and putting a DSP inside. And this puts us in a situation that, unlike analog companies, we benefit from the more advanced processes because, as you know, the digital enjoys from advanced processes, while the analog suffers from advanced technologies because it's far more expensive. And the deal with Intel will enable us, without going to the specifications of the chip, that each chip on this process will give us far higher performance, smaller and more efficient power, a power efficient chip. So that's the advantage of the iPhase.
Those of you know the digital enjoys form from the bulk purchases while the analogue suffered from.
One thing just because it's far more expensive and this deal was integral will enable us to win.
Going to the specs of the cheap that each cheap.
Process will give us.
Far higher performance smaller and more efficient power power efficiency. So that's the.
It's vantage of D. A.
I I'm not sure if this was to ask them.
Gideon Y. Ben: I'm not sure if this is what you asked. [inaudible] MIPI A5 chipset. Did you ask particularly about the MIPI A5 chipset or about the advantage of Valens? Just, you know, what Intel noticed about your chip architecture, obviously, to the audience. Well, um...
We'll be <unk> chipset.
Did you asked particularly about the mid <unk>.
Chipsets are about this month.
That's it.
Just you know what Intel noticed about your chip architecture, obviously geology.
Well.
<unk>.
The senior Vice President of Intel at two Penn.
Gideon Y. Ben: The senior vice president of Intel, Stu Penn, said that their goal is to identify transformative technologies, and this would put Intel in a position to do it, and I think this will put us in a position to do this deal. It accelerates innovation, and it really unlocks new opportunities that automotive companies don't have today. There are a lot of barriers today in the automotive industry regarding bandwidth, as we discussed before with AI, but also power. Power, power, and power. Speaking about the cars that have hundreds of watts, actually a range of kilowatts in order to operate a different system. And Intel addresses this particular problem as well. A side of the performance is both, for sure, but also the power. An EP8 chipset is the obvious fit for the next generation technology because the next generation technology, as I mentioned before, we speak about AI, is more resolution, more bandwidth, more resolution and depth of color, more bandwidth in order to capture and avoid more accident cases. And Intel did enable the resolution, the speed, and the power to accomplish those needs.
That's.
Their goal.
Is two.
To identify transformative technologies.
This.
Put into to do it and I think this will put us do this they feel it's accelerates innovation and it's really unlock opportunities new opportunities that automotive don't have today.
And the B b.
There are a lot of various today in the automotive industry regarding bandwidth as we discussed before with AI, but also power power power and power of D. D. D speaking about the cars the test.
Hundreds of us actually a range of kilowatts in order to operate a different system.
And Intel.
Into the dealers into addressing this particular problem as well.
Of the of the performance inside of the pro forma divorce for sure but also the power.
800 chipset is the obvious speak for the next generation technology, because the next generation to come to you as I mentioned before we speak about about the AI.
He is more resolution more.
Bandwidth more solutions and depth of the clear more bandwidth in order to capture and avoid more accidents cases.
And add to.
Intel did enable the resolution and the speed.
<unk> and the power to accomplish those needs and this is why we think it's a.
Gideon Y. Ben: And this is why we think it's a transition for the automotive industry. Thank you, Gideon, very helpful. If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions at this time. Mr. Bensfield, would you like to make your concluding statement? Yes, please.
Transitioning into automotive and automotive so the FERC motive.
Okay, great very helpful. Thanks, guys.
If there are any additional questions. Please press star one if you wish to cancel your old class. Please press star two please standby, while we poll for more questions.
There are no further questions at this time, Mr. Bernstein would you like to make your concluding statement, yes Peters. Thank you I would like to thank you all for joining us today for our Q4 and the full year 2023 call and.
Gideon Y. Ben: Thank you. I would like to thank you all for joining us today for our Q4 and the full year 2023 call and for your continued support and interest in Valens Semiconductor. Thank you. This concludes the Valens Semiconductor fourth quarter and final results of the 2023 conference call. Thank you for your participation. You may go ahead and disconnect. Thank you for watching.
And for your continued support and interest in Berlin semiconductor.
Yeah.
Thank you. This concludes the Valens semiconductor fourth quarter and final results of 2023 conference call. Thank you for your participation you May go ahead and disconnect.
Okay.
[music].