Q2 2025 Valens Semiconductor Ltd Earnings Call
Good morning. My name is Yoni and I will be your conference operator. Today at this time, I would like to welcome everyone to valence semiconductors second quarter 2025 earnings conference call and webcast.
All participants have been placed in a listen-only mode. Opening remarks by Valencia, semiconductor management will be followed by a question and answer session.
I will now turn the call over to mikal benari investor relations for Valencia semiconductor. Please go ahead.
Thank you and welcome everyone. To Valencia, semiconductor second quarter 2025 earnings call with me today are Gideon Bensley, chief executive officer and Guy, natanzon Chief Financial Officer earlier today, we issued a press release that is available on the investor relations section of our website under investor valent.com.
As a reminder, today's earning 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. 20x filed with the SEC on February 26th, 2025, for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy.
We'll be discussing certain non-gaap measures on this call, which we believe are relevant in, assessing the financial performance of the business and you can find reconciliation of these metrics within our earnings release.
With that, I will now turn the call over to Gideon.
Thank you mikal. Hello everyone. And thank you for joining us.
We are pleased with our performance in Q2, where we exceeded our guidance and delivered revenues of 17.1 million.
This marks the fifth consecutive quarter of growth for our company, gaap gross, margin came in at 63.5% in the mid-range of the guidance and adjusted. The beta loss was 4.0 million above the guidance range.
Nevertheless, like many in our industry, we haven't been immune to the impact of global terrorists.
These have prompted some customers to lower their forecasts for the second half of the year which we expect will affect our Revenue Outlook. Therefore, we are updating our full year 2025 Revenue. Guidance to be in the range of 66 to 71 million
Still, the momentum continues, and the new guidance range reflects a 14% to 23% increase compared to 2024, which is in line with the long-term plans we presented.
Before we dive into the activities in Q2, I would like to remind you of our go-to Market strategy at valence which Begins by targeting integration into high-end products. Our chips have always been known across Industries for offering the best connectivity available, the highest bandwidth. The simplest wiring infrastructure.
The most resilient to interferences for this reason. When we enter a new market, we expect penetration to take time companies, start with extensive evaluation of the chip then integrated into high-end models,
After that month or sometimes even years later, we see the market catching up. What starts out as a high-end only requirement becomes the new normal and the volumes increase accordingly.
We call it expectation, inflation.
And when this happens, our chips go from being a niche connectivity solution for premium products to must-haves for flagship product lines.
I'm bringing this up now. Because in Q2, we saw the latest examples of how this strategy bear fruit with our V 30000 chip.
Which covers professional audio video. Industrial machine vision and medical.
in the first half of 2025, we experienced growing demands from our customers mainly in the proy market and especially
3,000. This chip Remains The Only Solution on the market for the long range, distribution of uncompressed, HDMI 2.0, delivering High, Fidelity audio.
Is a net USB 2.0 controls and power. Over a simple category cable up to 100 m.
What we saw during the course of Q2 was a surge of new product based on this chip going from around 100, at the end of 2024 to more than 150 today.
This is a reflection of a market catching up, so to speak.
Where customers may have in the past. Been okay, with lower resolution video, conferencing setup or suboptimal office layouts expectations. Inflation has guided our customers to solve these issues with the vs3000 chipset.
Here are a few notable examples of customers who have already launched products built on our vs3000 chip.
Market leader Crestron based, its DM essential line on this technology.
In our journey has introduced, a 3-hour switcher for USB and HDMI K. Electronics, brought to Market and all-in-1, carpets, presentation, Matrix, and AV Pro Edge has released 18 gigabit
We expect momentum for this chip to continue as we carry forward into the end of 2025 and Beyond.
We received further recognition of the VSS 3000 growing Market penetration at infocomm International, where 3 of our customer won awards for products based on this chipset.
A pan.
For its innovative dual sided digital signage solution.
Rethink Ave for a fully uncompressed 4K and USB 3.2 extension solution in a single box, which also use the VST 6320 and M solution for the first of its kind device. Capable of extending uncompressed, 4K video over. USB type-c using display link alt mode.
It wasn't just our customers. Valen, also won awards during the 2 info come events in Beijing and Orlando.
It infocomm, China. In April, we were honored with the best of show. Editor's Choice Award in the best technology application category for a vs. 6320 chip.
from International in June, we were honored with the
reward.
Of our VA 7000 chip recognized for its Innovation features and Industry impact.
Experience, with an 8 camera setup, along the hdb STA lines, boost perimeter. We enabled real-time gesture recognition and dynamic camera angle control which could be used in applications such as retail and impersonal entertainment.
This demonstration was created in collaboration with this re embedded look, sensing Technologies and enabled by Nvidia.
Staying within the cross industry business units. I would like to discuss another industry Machine Vision. This is another recorded sample of go to market strategy Target. The market with a premium offering and let the market catch up.
Well, let's AI offering attracted strong interest across a couple of events.
Automating the joint and ISS in Japan. This was thanks to our chipsets robust, Emi performance, Long Reach capabilities and suitability for compact high bandwidth camera systems.
Our presence helps strengthen relationships with key players positioning a fine as a leading candidate for National, Factory Automation and inspection systems.
In July, we were proud to announce that our VA 7000 chipset is enabling the market. First comprehensive camera to processor. Mpa5 platform offered by these 3 embedded.
I resilience longer linked distances and the ability to operate over simple low-cost cabling.
The chipset also features built-in Advanced Diagnostic for continuous link monitoring and preventive maintenance.
This directly addresses 1 of the major challenges in Factory flow machine Vision ensuring round clock system. Reliability is equipment ages and operating conditions evolve.
The platform includes some additional components from other leading companies, a processor from Nvidia digestion, Orin and Expo, Nano and sensors from Sony.
In addition, these 3 embedded is offering 6 A5 design core Discovery series skus.
On the significance of this partnership, these 3 embedded CEOs, Scott Redan remarked quote.
A fee ability to deliver high-speed data over a long distance with exceptional. Electromagnetic compatibility is a game-changer for the industry.
Investing in this technology was crucial because it addresses, the key challenges, our customers face, reliable connectivity, in harsh environments and simplified system design including the industry's first ever use of unshielded Twisted per channels for multigig use cases.
By building this platform around MPA fee and partnering with Valens Semiconductor, we are giving developers a powerful, flexible toolset to accelerate innovation in embedded vision.
In all we continue to support our customers in bringing solutions to the market based on our v7000 and be a 6320 chipset.
We expect Machine Vision to become an increasingly meaningful part of our Revenue mix in the coming quarters, which initial Revenue anticipated by the end of 2026 and strong growth, Potentials in the US that follow.
I would like to close out the discussion of our crops industry business. Unit with the update, on the notable progress, we're making in medical endoscopies,
We have the two Road Tools in Europe and Japan, where we showcase our V7000 chipsets and their ability to support a new generation of reliable, high-quality endoscopic procedures.
What I can disclose specific names. We have received initial feedback from some of the largest players in the industry. We came away more confident than ever. There's valence value. Proposition is essential in moving the market forward. As a reminder, this is still a small part of our business, but 1 with significant long-term potential,
Unlocking, this potential status, validation of our offering, from the industry's leading players. And in Q2, we begin to see that validation taking shape.
Now, I'd like to turn to the automotive industry.
As a reminder opportunity in automotive is dominated by the v7000, the same ship set that drives our offering in the Machine Vision and medical Industries.
The V7000 extends an interface, CSI-2. It is used commonly across a number of industries, offering high bandwidths and best-in-class EMI immunity. It is the first chipset on the market to comply with the MPI standard for high-speed sales of connectivity.
Late. Last year, we announced redesign Wings which leading European oems for this solution, gaining a strong, foothold for the A5, within the OEM community.
Building on the momentum in Q2, we brought the v7000 and the broader AI ecosystem to the global stage.
At Auto Shanghai.
We unveiled a number of demonstrations showing AI connectivity with products from major industry players.
First, we had qualcomm's Snapdragon right for evaluation platform with AI connectivity.
Second, we had Chinese T1 Supply, the say SV with an A5, surround view system. Third, we had Horizon robotics Journey platform with AI and finally, an AIS reference designs with Sigma Star based on AI,
From around the world, the keynote address at the opening. Plenary was given by a senior vice president at mobilite. I remind you that in q1, we are now that mobilized is the Tier 1 involved. In our 3, AI design wins.
In his address, the executive stated that mobili anticipates.
a significant expansion of
system, which
active participation from all services and cameras and so vendors.
In addition he provides certain feedback about the Valencia. 7000 is of integration highlighting performance design, flexibility and fast time to Market.
In that same meeting a representative of leading automotive OEM shared with the audience, why his company chose balance, A5 compliance chipset for their Adis platforms?
His endorsement of our technology was exceptionally strong from highlighting. Its Superior noisy immunity to its support for smaller. More cost effective cameras and more.
He summed it up best when he said, "AI is much better performance than the incumbent solutions."
Award about the momentum of in Asia earlier. This year, we announced interoperability testing with 7 different. A city called vendors in China, a Testament of the vast Market opportunity that existed for these standardized connectivity solution. In addition, we announced a special Partnerships with The Local Company es win Computing, which will allow us to streamline our sales into the issue markets.
This kind of localization activity places us in a stronger competitive position as we advertise our chips to the many global OEMs based out of China. As an example, our chipsets are currently undergoing advanced testing by a leading Chinese OEM, which wants to use a resolution with a low-cost harness for its next generation 8 assistant.
It's clear that momentum around. AI is building all around the world. We continue to participate in several evaluation processes as various stages with multiple oems.
Now, before I turn the call to guy, I want to take a moment to acknowledge the leadership transition. We announced in May I'll be stepping down a CEO of a lens semiconductor by the end of 2025. It's been an honor leading this exceptional team for over 5 and a half years through major Milestones from listing on the New York Stock Exchange.
Change.
To securing 3 design wins for the mpa fee compliant. VA 7000 chipset to expanding into new verticals, like Machine Vision and medical
This plan transition is designed to ensure continuity and preserve momentum. Moving forward, needless to say, if additional time is required, I'll extend my stay until a successor is in place. I plan to remain actively involved as a board member. And as a shareholder thereafter with that guy, please go ahead and discuss our financial performance in more detail.
Thank you, gone. I'll start with our second quarter results and then provide our outlook for the third quarter of 2025
We generated quarterly revenue of 17.1 million, which exceeded our guidance of between 16.5 million to 16.8 million.
This compares to revenue of 16.8 million in q1, 2025 and 13.6 million in Q2 2024.
The cross industry business or CIB, accounted for 12.8 million or or approximately 75% of the total revenue while Automotive, contributed 4.3 million or approximately 25% of total revenue. This
Water.
This compares to q1 2025 revenue, of 11.7 million from cab, and 5.1 million from Automotive, which represented, 70% and 30% of total revenue respectively.
In Q2, 2024 revenue from CIB, where 8.1 million, and 5.5 million were from Automotive representing 60% and 40% of total revenue respectively.
Million dollars compared to $10.6 million in the first quarter of 2025 and compared to $8.3 million in the second quarter of 2024.
Q2 2025 gross margin was, 63.5% compared to our guidance of between 63% and 64%.
This compares to a q1, 2025 gross margin of 62.9% and 61.4% in Q2 2024.
On a segment basis. Q2 2025 gross margin for the CIB was 67.8% and gross margin for automotive was 50.5%.
This compares to a q1 2025, gross margin of 69.1% and 48.4%, respectively. And a Q2 2024, gross margin of 75.4% and 40.9% respectively.
The decrease in the gross margin of the CIB, compared to Q2 2024 was due to a change in product. Mix the increase in Q2 2025, in automotive, growth margin compared to q1, 2025 was due to an optimization of our product cost.
Non-gaap growth margin in Q2 was a strong at 67.2%, which compared to 66.7% in q1 2025 and 64.5% in Q2 2024.
Operating expenses in Q2 2025 totaled, 18.2 million compared to 20 million in the end of q1 2025 and 17.8 million in Q2 2024.
The decrease compared to q1 2025 is mainly due to the change in annual to clear ability.
Research and development expenses in Q2 totaled 10.2 million compared to 10.6 million in q1 2025 and 10 million in Q2 2024.
Sgna expenses in Q2 were 8.9 million compared to 9.3 million, in q1, 2025, and 7.8 million in Q2 2024.
Gap, net loss in Q2 was 7.2 million compared to a net loss of 8.3 million, in q1 2025, and a net loss of 8.9 million in Q2 2024.
Adjusted BB do in Q2 was a loss of 4 million, better than the guidance range of loss between 4.9 million and 4.4 million.
This compares to an adjustable dose of 4.3 million in q1 2025, and an adjusted balance of 5.2 million in Q2 2024.
Gap loss per share for Q2 was 7 cents compared to a gap loss. Per share of 8 cents in q1 2025, and a gap lost per share of 8 cents for Q2 2024.
Non get lost per share in Q2 2025 was 4 cents, compared to a loss per share of 3 cents in q1 2025 and a loss per share of 4 cents in Q2 2024.
The difference between gaap and non-gaap loss per share, was mainly due to a stock based compensation change in earnestly, ability, and depreciation and amortization expenses.
Now turning to our balance sheet, we ended Q2 with cash cash equivalent and shortened deposits, totaling 102.7 million and no debt.
This compares to 212.5 million at the end of q1, 2025 and 130.6 million. At the end of Q2 2024.
On November 24, we launched our initial share purchase program of up to 10 million.
Followed by second planning, February, 2025, increasing our commitment by an additional 15 million.
While the first plan was completed during q1, 2025, during Q2, we invested 10.2 million from the second plan, demonstrating our ongoing dedication to returning value to our shareholders.
During July 2025, we have completed the share repurchase program under the second plan.
Capital at the end of Q2 was 106 million compared to 219.8 million, at the end of q1 2025 and 142.3 million. At the end of Q2 2024, our inventory as of June, 3025 was 11.5 million. A slight increase from 10.9 million on March, 31st 2025, and down from 14.1 million on June, 30 2024.
now, I would like to provide our guidance for the third quarter of 2025
As given mentioned, the uncertainty surrounding tariffs, has led some customers to reduce their forecasts. Therefore, we expect Q3 Revenue to be in the range of 15.1 to 15.6 million. For 2025, we expect Revenue to build the range of 66 million to 71 million. We expect gross margin for Q3 to build the range of 58% to 60%. And we expect adjusted DB dollars in, Q3 to be in the range of 7.4 to 6.8 million loss. Although we have adjusted our full year guidance due to the unpredictable impact of tariffs, our confidence in the companies.
Long-term strategy and market opportunity remains unchanged.
I'll now turn the call back to giddon for his closing remarks before opening, the call for Q&A,
Thank you guy. We believe that Valencia conductor is well positioned to return to gross across our Target markets supported by our industry, leading technology and robust balance sheet. Our Focus remains in executing, our long-term strategy to drive sustainable growth and profitability.
I would also like to extend a hostile. Thank you to our employees. Who are true to the spirit of balance and much. Like our technology demonstrate remarkable, resilience and determination.
With that, I'll now open the call to answer 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 with the handset, before pressing the numbers, please, ask your question in a loud and clear voice. Your questions will be pulled in the order. They are received please stand by while we pull for your questions.
The first question is from Quinn, Bolton of Neiman Company. Please go ahead.
Hey, uh, this is Neil Young on for Quinn Bolton. Thanks for taking my questions. Uh, so you mentioned that the downward revision to both the Q3 and full-year revenue guide is primarily tied to tariffs. Uh, could you help us understand how the pressure is distributed across the two segments? Specifically, is one segment, CIB or Automotives, seeing a more pronounced impact in Q3? Thanks.
Thank you, thank you for the question and I'll be pleased to answer. We are selling semiconductor to electronic and Automotive Industries. They are the 1 who are affected by the tariffs, because their products are produced in countries, which are terrorists exposed. And this is the reason we are exposed. It's not that our chips are on the tariffs. It's our customers, who integrate our chips. Are those who are in the tariffs, and this is the valid both for automotive. And for audio video,
Okay. Great thanks. Um, so in first quarter on the second quarter, we talked about the optimization of product costs within Automotive. Uh, do you foresee that uh repeating in 3Q and boosting Auto growth margin? Um I guess if possible. Could you just discuss what you expect from gross margin across the 2 segments and 3 Q.
And maybe throughout the rest of the year, thanks.
so, we provided the guidance for the third quarter, and on the growth margin and we typically do not provide the allocation between the different segments,
For Q3.
In terms of the gross margin.
When are you done?
I am. Thank you.
Okay. Thank you. The next question is from Rick Shaffer of Oppenheimer. Please go ahead.
Hi. This is, uh, way mark on the line for Rick and, uh, thanks for taking the question. Um, with the 3Q Outlook and the revised full year guidance, lower to 66 million to 71 million. Looks like 32 should be the bottom. And with some of the Tariff policies, starting to take shape. Are you seeing any improvements in orders and bookings compared to 30 days ago? Um, which business do you see that rebound? Um, accelerate in 42?
I'm sorry, can you please repeat that? I'm not sure. I didn't understand the question.
Yeah, sure. Um, yeah. So you provided the 32 Outlook. Um, it looks like it's going to be declining. Um,
Around uh, 4%, uh, around.
Around around 10% for 3Q, but then with the full year guidance, it looks like it's going to be recovering. Um, 25% in 42. So what's Which business? Do you see that accelerating in 42?
So again, we do not provide the location between the uh the different segments, not in terms of Revenue as well as other parameters. We provide the numbers for the overall company and I would say that in in both segments, we see kind of a temporary weakness for the first quarter and kind of a, a better for a visibility for the fourth quarter and all together for the year. We declare we
We used the guidance as already indicated.
Okay, great. That's all for me. Thanks.
The next question is from.
Suji dilva of Ross, Capital. Please go ahead.
Yeah, hi. Um, Gideon. Hi guy. Any uh, caller on the auto, 30m design wins. What the next Milestones are that we should be watching for
Hi, suji, thank you for your question. Uh, yeah. I can provide some information on yet. I can't tell the names, but I can say it's very prestigious companies, and it creates, um,
A positive noise in the industry that such a respective companies, selected us, purely on quality, and our capability to do more than others in the uniqueness of our solution. And we hope that we know that we hope we, we we know that we will generate a more attention and we do with others. Of course we don't we cannot disclose anything which is in the process only after we have something formally but we're working with it and leveraging this success of the industry, oems
Okay. All right. Thanks Kitty. Thanks guys.
The next question is from Robert Lynch of Stonegate. Please go ahead.
Hi guy. Hi Gideon. Good morning. Uh, thank you for taking my questions. I'm on for Dave storms today.
I just wanted to ask a question around customer acquisition in industrial Machine Vision. Um there appear to be some strong Tailwind in Machine Vision following the D3 platform. Uh could you speak to the customer acquisition Trends within that segment um and and how the pipeline is shaping up moving forward
Yep. Uh, thanks for the question and I will answer as follows first the, um, Machine Vision. Is, we have a very good Market product Market. Fit, it is both AI. It's both cameras that need to be remoted with very low error rate with very high bandwidth and, um, with no compression. So it's exactly what we know to provide them very unique. Uh, this Market is a market that is
Growing and we are speaking with the leading customers in this industry and already have this done wins. Uh and we will hopefully have a lot more designs to discuss in the future. And it's mainly, we say our VA 7000, and also um, in a lot of interest, with the VSS 6320, uh the Machine Vision looks as um, very natural
Progress and very natural development of our products, both from automotive and audio video that's find their way to um the uh this industry. And this is the source of where we see um the demand.
Regular Market. The original Market, we have, we see a, a, a recovery, it's not very fast recovery, but there is recovery, definitely the tariffs and maybe less facet with that that could. But there is recovery in the traditional Audio Video Market. And there is a new developing Market, which is the conference rooms where we have again, a very good product Market. Fit for the future conference room. Conference room is a growing Market. As you can see the, uh, the cameras in, in the in in many, in the lot more rooms that are complementary, the whole, uh, video, um, uh, experience the whole video conferencing experience. And this is Market, which we are growing into H, in, in this audio video and it's, I would call it a derivative of the segment I think. This is the best definition of the growth. So we have the recovery of the traditional and this uh additional new segment as well.
Alright, thank you very much for the caller there. Um I'll hop back in the queue um really appreciate it and congratulations on Q2, thank you. The next question is from Quinn Bolton of nidam and Company. Please go ahead.
Hey guys, thanks for, uh, taking my question. I just wanted to ask, you know, obviously tariff uncertainty has caused customers to reduce near-term forecasts. But have you seen any change in their, uh, product development plans? You know, anything that might affect your longer-term opportunity in the machine vision market?
Um, I I thanks again for the question and we don't see a particular change in what the companies are looking to develop. Um, we, uh, even the opposite, we see that they're very stick to the, um,
Plans and, um, and, and the development of the market, um, the same development, maybe the speed changes. Maybe the, uh,
Tariffs have some influence, but the companies are looking ahead I believe with the same focus and the same uh um the the same product road map and going through the same customers of the customers.
Great, thank you for that. And then in in the prepared uh script get in, you mentioned the Snapdragon ride platform and I wasn't sure. Could you just expand on, you know what you're doing with with that platform? Are you part of that reference design? Was it just a demo to show interoperability? Um, you know, any other information you could you could
Would be helpful. Thank you. Yeah, we show. And it's very important for us to show. Not only that, our chips have an advantage, we show how simple it is for the customers to integrate. And some of the, um, advantages for the lens is that the integrating the VA 7000 to customers is very fast and create stability, also very fast. So this is the reason we are making our ourselves compatible to chips like the, um, uh, like, like the, like, the Qualcomm and, and, and, and the Nvidia and others in the industry. And uh, yes, it, it it works well and it shows in the probability very fast.
Got it. Okay, thank you.
Thank you.
Is there any additional questions, please press star 1, if you wish to cancel your request. Please press star, 2, please, stand by. While we call for more questions.
There are no further questions at this time.
Mr. Benby, would you like to make your concluding statement? Yes, thank you. I would like to thank you all for joining us today. For our second quarter, 2025 and in call and for your continued support and interest in Valencia, we conduct semiconductor and we hope to meet you again in our next learning call. Thank you and goodbye.
Thank you. This concludes the valence semiconductor results conference call.
Thank you for your participation. You may go ahead and disconnect.