Full Transcript: Valens Semiconductor Q1 2026 Earnings Call

Valens Semiconductor (NYSE:VLN) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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Access the full call at https://events.q4inc.com/attendee/552831527

Summary

Valens Semiconductor Ltd reported Q1 2026 revenues of $16.9 million, exceeding the top end of their guidance.

GAAP gross margin was 62.2%, surpassing expectations, while adjusted EBITDA was a loss of $5.5 million, smaller than anticipated.

Strong adoption was seen for the VS3000 and VS6320 chips, with strategic partnerships and product releases from major AV manufacturers.

The company demonstrated the interoperability of its VA7000 chipset for automotive, reinforcing its position in the market.

Guidance for Q2 2026 includes revenues between $17.2 million and $17.6 million, with a full year outlook unchanged at $75-77 million.

CFO Guy Nathanson announced his departure, with a search underway for his replacement.

Full Transcript

OPERATOR

Thank you for standing by and welcome to The Valens Semiconductor Ltd First Quarter 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question again, press Star one. Thank you. I'd now like to turn the call over to Mikey Benari of Investor Relations. You may begin.

Mikey Benari (Investor Relations)

Thank you and welcome everyone to Valens Semiconductor Ltd first quarter 2026 earnings call. With me today are Johan Zeinjer, Chief Executive Officer and Guy Nathanson, Chief Financial Officer,. Earlier today we issued a press release that is available on the Investor Relations section of our website under investors.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 release. Please refer to our Annual report on Form 20-F filed with the SEC on February 25, 2026 for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy. We will be discussing certain non GAAP measures on this call which we believe are relevant in assessing the financial performance of the business and you can find reconciliation of these metrics within our earnings release. With that, I will now turn the call over to Yola.

Yola

Thank you Mikey hello everyone and thank you for joining us. During our last call we discussed how macroeconomic conditions and slow pace of technology adoption could affect our business in 2026 and our first quarter was in line with our expectations. Nevertheless, we are pleased to report that our revenues exceeded the top end of our guidance at $16.9 million. GAAP gross margin for the first quarter came at 62.2%, well above the guidance. Our adjusted EBITDA was a loss of $5.5 million, smaller than anticipated loss compared to our guidance. I'd like to highlight some of our key achievements in Q1 and I'll start with audio video. We continue to see strong adoption of one of our newest chips, the VS 3000, as the industry trends towards high resolution video. As a reminder, this chip is the only one on the market that can extend uncompressed HDMI 2.0 over widely used category cables. In Q1 we saw additional products hit the market based on this chip. One exciting example came from a leading AV manufacturer, Extron, which released to the market new metric switches built for premium collaboration spaces what they're calling the DTP3 cost point 42 series. Our chip is the cornerstone technology underpinning this product supporting uncompressed video, audio and controls up to 330ft. This is great news for Valens as the VS3000 is the most advanced HD based chip we offer and is a pillar of the growth opportunity in our core audio video market. We are also seeing healthy traction with our newest VS6320 chip. As a reminder, this is the first and only high performance USB 3.2 extension solution built on a dedicated chip. Continuing the momentum in Q1, we saw another major AV manufacturer released to the market a product based on the VS6320. We are encouraged by the continued adoption of this innovative chip as we move further into 2026. Both chips features notably at our booth during key first quarter events, CES in January and ISE in February. Across both events, our customers and partners were enthusiastic about our technology demonstrations and the innovations our chips can enable. Innovations like multi camera extension over a single cat cable, single box extension of uncompress 4K video and USB3, streamlined infrastructure supporting multiple cameras and sources and full room conferencing set up with USB C to USB C extension. We look forward to replicating the success of those events at additional audio video focus show around the world including the upcoming Infocom International show in Las Vegas. I'd like to turn now into the automotive industry. Our opportunity in automotive is dominated by the VA7000 chipset which offers high performance connectivity of cameras and radars used in ADAS and autonomous driving. The VA7000 is the first chipset on the market to comply with the MIPI A5 standard. Our ability to promote this chipset hinges not only on its clear technological advantages for OEMs but also in the compliance with the standard. As you know, the automotive industry has been actively working to move away from proprietary solutions driven by concerns around vendor lock in and supply chain uncertainty. The defining characteristic of a true standard is interoperability that AFI compliant components from different suppliers can work together seamlessly. In Q1 we demonstrated exactly that at Auto China, a valence deserializers connected to AFI serializers from two other service vendors. This marks the first three company demonstration of any interoperable service connectivity solution anywhere in the world for any service standard. This is not just technical milestones, it directly reinforces one of the core value propositions of our AFI offering, eliminating vendor lock in, reducing supply chain risk and enabling a more flexible multi vendor ecosystem for the OEMs. Of course, we continue to participate in several other evaluation processes at various stages with multiple OEMs. With that, I would like to turn the call to Guy to discuss our financial performance in more detail.

Guy Nathanson (Chief Financial Officer)

Thank you Joram. I will start with our first quarter of 2026 results and then provide our outlook for the second quarter of 2026. We achieved quarterly revenues of $16.9 million which exceeded our guidance of between $16.3 million to $16.7 million. This compares to revenues of $19.4 million in Q4 2025 and $16.8 million in Q1 2025. The Cross Industry business or CIB accounted for $11 million or approximately 65% of total revenues, while Automotive contributed $5.9 million or approximately 35% of total revenue this quarter. This compares to Q4 2025 revenues of $13.9 million from CIB and $5.5 million from from Automotive which represented approximately 70% and 30% of total revenues respectively. It also compares to Q1 2025 revenues of $11.7 million from the CIB and $5.1 million from Automotive representing 70% and 30% of total Revenues respectively. Q1 2026 gross profit was $10.5 million compared to $11.7 million in the fourth quarter of 2025 and compared to $10.6 million in the first quarter of 2025. Q1 2026 gross margin was 62.2% compared to our guidance of between 57% to 59%. This compares to Q4 2025 gross margin of 60.5% and Q1 2025 of 62.9%. On a segment basis, Q1 2026 gross margin from the Cross Industry business was 70.8% and gross margin from Automotive was 46.2%. This compares to a Q4 2025 gross margin of 66.4% and 45.9% respectively and a Q1 2025 gross margin of 69.1% and 48.4% respectively. The increase in the gross margin of the CIB compared to Q4 2025 was was mainly due to product mix. Non GAAP Gross margin in Q1 was at 65.2% which compares to 63.9% in Q4 2025 and 66.7% in Q1 2025 Operating expense in Q1 2026 totaled $19.4 million compared to $20.9 million at the end of Q4 2025 and $20 million in Q1 2025. Research and development expense in Q1 totaled $10.3 million compared to $11.1 million in Q4 2025 and $10.6 million in Q1 2025. FGA expense in Q1 were $9.4 million compared to $10.1 million in Q4 2025 $9.3 million in Q1 2025. GAAP net loss in Q1 was $8.3 million compared to a net loss of $8.8 million in Q4 2025 and a net loss of $8.3 million in Q1 2025. Adjusted EBITDA in Q1 was a loss of $5.5 million below the guidance range of a loss between 7.9 million and $4.7.5 million. This compares to an adjusted EBITDA loss of $4.3 million in Q4 2025 and an adjusted EBITDA loss of 4.3 million dollars in Q1 2025. GAAP loss per share in Q1 was $0.08 compared to a GAAP loss per share of $0.09 for Q4 2025 and a gap lost per share of $0.08 for Q1 2025. Non GAAP loss per share in Q1 was $0.05 compared to a loss per share of $0.04 in Q4 2025 and a loss per share of $0. 3 in Q1 2025. The difference between GAAP and non GAAP loss per share was mainly due to stock based compensation and depreciation and amortization expense. Now turning to the balance sheet, we ended Q1 with cash, cash equivalents and short term deposits totaling $86.1 million and no debt. This compares to $92.6 million at the end of Q4 2025 and $112.5 million at the end of Q1 2025. Our working capital at the end of the first quarter was $91.3 million compared to $95.7 million at the end of Q4 2022 and $119.8 million at the end of Q1 2025. Our inventory as of March 31, 2026 was $10.9 million and increased from $10.1 million on December 31, 2025 and $10.9 million on March 31st 2025. Now I would like to provide our guidance for the second quarter of 2026, we expect Q2 revenues to be in the range of 17.2 to $17.6 million. We expect gross margin for Q2 to be in the range of 60% to 62% and we expect adjusted EBITDA loss in Q2 to be in the range Of 1.9 to $4.4 million loss. As a reminder, our full year guidance is unchanged between 75 to 77 million dollars. Before turning the call back to Yoram, I would like to take a moment to share that I will be leaving valens on July 13 to pursue new opportunities. I would like to take this opportunity to thank the exceptional team of Valens for professionalism and dedication. Valens has incredible technology that is in the high demand across industries and I'm confident that Yoram and the executive team will take the company to new heights. I'll now turn the call back to Yoram for his closing remarks before opening the call for Q and a.

Yoram

Thank you guy. On a personal note, I'd like to thank you for your significant contribution to Valens over the recent years. I enjoyed working with you and I hope our paths cross again in the future. I will note that the company has initiated a search for a replacement and we look forward to welcoming them to the team in due course. I believe that Valens is well positioned for success leveraging our superior technology and robust balance sheet, focusing on our core markets. I'm committed to driving meaningful growth opportunities as we move further into 2026 and beyond. With that, I'll now open the call to answer your questions. Operator

OPERATOR

thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star one in your telephone keypad. If you'd like to withdraw your question, simply press Star one again. Your first question comes from a line of Quinn Bolton from Needham and Company. Your line is open.

Neil Young

Hey everyone, this is Neil Young on for Quinn Bolton. Thanks for letting us ask some questions. So first question I wanted to ask was could you touch on what drove the quarter over quarter decline in CIB and within auto? How much of the strength was sustainable and demand versus you know, timing, inventory or customer ordering patterns? Was the auto upside still largely driven by Mercedes, or are you starting to see contribution from AFI ecosystem activity, mobileye related programs or any other customers? And then I have a follow up. Thank you. Thanks for the question.

Joram

So I'll start off by addressing the CIB result. When we kind of shared our guidance for the quarter, we said that we anticipate that there's going to be somewhat slowness in Q1 due to seasonality and a very strong Q4. That was actually the case. I want to reiterate that the guidance for the year is still remaining strong. So it has nothing to do with the demand and the anticipated growth in realization over the year. Regarding the automotive everything that you said regarding Mercedes is actually true. It has to do with the demand from Mercedes related to their sales of cars and therefore the uptake comes from Mercedes. Regarding the AFI project. Those are going to kind of factor in 2027. Just want to make a comment that those projects are advancing well aligned with the timeline. So we feel very confident that those wins would obviously impact our kind of revenues in coming years.

Neil Young

Great, thanks. And then I did want to ask about the full year guide. So you guiding 2Q to 17.4 at the midpoint, you know, puts first half revenue at 34.3 million. And you're talking about the full year guide midpoint of 76. I would say that implies a meaningful step up in second half. I guess. What gives you the confidence in a second half ramp and you know, how should investors think about the acceleration? Should it primarily come in cib, continued automotive strength? Any comment would be helpful. Thanks.

Joram

So let me reiterate, second half of 2026 is going to be way stronger than the first half. Our confidence in that has to do with the design, design ins or design wins and then design ins into our customers product. We have visibility to launch of those products throughout the year and therefore the confidence is reassured by actually monitoring how those products are going to hit the market and actually drive the growth in Q3 and Q4. Sorry,

OPERATOR

my apologies. Your next question comes from a line of Rick Schaefer from Oppenheimer. Your line is open.

way mock

Hi, this is way mock on the line for Rick. Thanks for taking the question and best of luck. Your next endeavors. For my first question I wanted to follow up on ci