Valens Semiconductor .(VLN) - 2022 Q1 - Quarterly Report

Executive Summary Fourth Quarter and Full Year 2021 Performance Highlights Valens Semiconductor achieved record revenues for Q4 and full year 2021, driven by strong demand in its Audio-Video and Automotive segments Key Performance Metrics | Metric | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | YoY Change (FY) | | :----- | :------ | :------ | :------ | :------ | :-------------- | | Revenues | $20.7 million | $14.1 million | $70.7 million | $56.9 million | +24.2% | | Audio-Video Revenues | N/A | N/A | $62.8 million | N/A | +14.5% | | Automotive Revenues | N/A | N/A | $7.9 million | N/A | +281% | | GAAP Gross Margin | 71.2% | 72.8% | 71.6% | 76.4% | -4.8 ppts | | Non-GAAP Gross Margin | 71.5% | 73.4% | 71.8% | 76.9% | -5.1 ppts | | Record Backlog (as of Dec 31, 2021) | N/A | N/A | $78.2 million | N/A | N/A | | Cash, cash equivalents and short-term deposits (as of Dec 31, 2021) | N/A | N/A | $174.4 million | N/A | N/A | - Shipped first-in-industry MIPI A-PHY automotive chipsets to potential customers and leading ecosystem players[3][5] - Generated initial revenue from Stello, the newest Audio-Video product family, which is already embedded in designs of over 100 different products[3][5] - Met all customer demand despite a severely supply-constrained environment[5] Business and Strategic Developments The company advanced its market position in 2021 through mass production for Mercedes-Benz and the launch of its new Stello chipset - 2021 marked the first full year of mass production for first-generation chipsets in Mercedes-Benz automobiles[3] - Shipped first-in-industry engineering samples of MIPI A-PHY standard chipsets (VA7000) to OEMs, Tier 1s, and other leading automotive companies for evaluation[3] - Introduced and began generating revenue from the new Stello chipset product family in Audio-Video, which is embedded in over 100 different products[3][5] - Plans to expand its foothold in Automotive and Audio-Video markets with new product offerings in 2022 and beyond[4] First Quarter and Full Year 2022 Outlook The company projects continued revenue growth for 2022, with a significant increase anticipated in the Automotive segment Q1 and Full Year 2022 Guidance | Metric | Q1 2022 Guidance | FY 2022 Guidance | | :----- | :--------------- | :--------------- | | Revenue | $20.6 million - $21.0 million | $83.0 million - $85.0 million | | Gross Margins | 66.5% - 67.0% | 65.5% - 67.2% | | Adjusted EBITDA | $(10.7) million - $(9.7) million | $(38.4) million - $(37.8) million | - Anticipates substantial growth in Automotive revenues in 2022 compared to 2021[8] - The company's ultimate goal is to achieve and amplify profitability[6] Company Overview About Valens Semiconductor Valens Semiconductor provides high-speed connectivity solutions for the automotive and audio-video industries, with its HDBaseT technology a market standard - A leading provider of semiconductor products for long-reach, high-speed video and data transmission for the automotive and audio-video industries[15] - HDBaseT technology is the leading standard in the professional Audio-Video market with tens of millions of chipsets integrated into products[15] - Valens Automotive chipsets are already on the road and its technology is the basis for the new international standard for automotive connectivity[15] Forward-Looking Statements This report contains forward-looking statements that are subject to significant risks, uncertainties, and other factors - Forward-looking statements are identified by words such as "estimate," "plan," "project," "forecast," "intend," "will," and "expect"[12] - These statements are based on current expectations of management and are not predictions of actual performance[12] - Statements are subject to risks including changes in market conditions, ability to manage growth, competition, and global health epidemics[13][14] Detailed Financial Statements Summary of Financial Results This section presents key GAAP and Non-GAAP financial metrics for Q4 and the full year 2021 Financial Highlights (in thousands, except per share data) | Metric | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :----- | :------ | :------ | :------ | :------ | | Revenues | $20,739 | $14,123 | $70,684 | $56,910 | | Gross Profit | $14,767 | $10,288 | $50,579 | $43,478 | | Gross Margin | 71.2% | 72.8% | 71.6% | 76.4% | | Net loss | $(7,973) | $(6,011) | $(26,534) | $(19,635) | | Cash, cash equivalents and short-term deposits | $174,359 | $61,570 | $174,359 | $61,570 | | Net cash used in operating activities | $(11,380) | $(6,368) | $(21,609) | $(19,606) | | Non-GAAP Gross Margin | 71.5% | 73.4% | 71.8% | 76.9% | | Adjusted EBITDA (after issuance-related costs) | $(6,951) | $(4,592) | $(14,010) | $(16,366) | | Loss per share (after issuance-related costs) | $(0.08) | $(0.56) | $(0.62) | $(1.88) | Condensed Consolidated Statements of Operations The statement details revenues, costs, and expenses, resulting in a net loss for the reported periods Statement of Operations (in thousands, except per share data) | Metric | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :-------------------- | :------ | :------ | :------ | :------ | | REVENUES | $20,739 | $14,123 | $70,684 | $56,910 | | COST OF REVENUES | $(5,972) | $(3,835) | $(20,105) | $(13,432) | | GROSS PROFIT | $14,767 | $10,288 | $50,579 | $43,478 | | Research and development expenses | $(14,890) | $(10,833) | $(46,875) | $(44,725) | | Sales and marketing expenses | $(4,460) | $(3,420) | $(14,214) | $(13,657) | | General and administrative expenses | $(4,042) | $(2,454) | $(16,556) | $(7,884) | | TOTAL OPERATING EXPENSES | $(23,392) | $(16,707) | $(77,645) | $(66,266) | | OPERATING LOSS | $(8,625) | $(6,419) | $(27,066) | $(22,788) | | NET LOSS | $(7,973) | $(6,011) | $(26,534) | $(19,635) | | BASIC AND DILUTED NET LOSS PER ORDINARY SHARE | $(0.08) | $(0.90) | $(1.15) | $(3.25) | - General and administrative expenses for FY 2021 include $5,958 thousand in issuance-related costs[23] Condensed Consolidated Balance Sheets The balance sheet outlines the company's assets, liabilities, and shareholders' equity as of year-end 2021 and 2020 Balance Sheet (in thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | TOTAL CURRENT ASSETS | $199,031 | $76,377 | | TOTAL LONG-TERM ASSETS | $3,569 | $2,788 | | TOTAL ASSETS | $202,600 | $79,165 | | TOTAL LIABILITIES | $20,403 | $11,777 | | REDEEMABLE CONVERTIBLE PREFERRED SHARES | — | $149,611 | | SHAREHOLDERS' EQUITY (DEFICIT) | $182,197 | $(82,223) | - Significant increase in cash, cash equivalents and short-term deposits from $61,570 thousand in 2020 to $174,359 thousand in 2021[21][26] - Redeemable convertible preferred shares were converted to ordinary shares by September 29, 2021, resulting in a shift from a shareholder deficit to positive equity[26][35] Condensed Consolidated Statements of Cash Flows This statement details cash flows from operating, investing, and financing activities for fiscal years 2021 and 2020 Statement of Cash Flows (in thousands) | Metric | FY 2021 | FY 2020 | | :-------------------- | :------ | :------ | | Net cash used in operating activities | $(21,609) | $(19,606) | | Net cash provided by (used in) investing activities | $(84,163) | $28,314 | | Net cash provided by financing activities | $135,431 | $406 | | INCREASE IN CASH AND CASH EQUIVALENTS | $30,475 | $10,760 | | CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | $56,791 | $26,316 | - Net cash provided by financing activities significantly increased in 2021 due to proceeds from transactions related to the merger (public listing)[6][28] Reconciliation of GAAP to Non-GAAP Financial Measures This section reconciles GAAP Net Loss and Loss per Share to their non-GAAP counterparts, Adjusted EBITDA and Non-GAAP Loss per Share - Adjusted EBITDA is defined as net profit (loss) adjusted for financial items, taxes, depreciation, amortization, and share-based compensation[19][30] - Non-GAAP measures may not be comparable to similar measures disclosed by other issuers due to different calculation methods[19][30] - Guidance for projected Net profit (loss) is not provided due to the high variability and difficulty of making accurate forecasts for certain elements[31] Adjusted EBITDA Reconciliation This table reconciles GAAP Net Loss to Adjusted EBITDA by adjusting for non-cash and non-operating items Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :-------------------- | :------ | :------ | :------ | :------ | | Net loss | $(7,973) | $(6,011) | $(26,534) | $(19,635) | | Financial income (expense), net | $(820) | $(428) | $(929) | $(3,300) | | Income taxes | $169 | $37 | $407 | $164 | | Equity in earnings of investee | $(1) | $(17) | $(10) | $(17) | | Depreciation | $312 | $294 | $1,099 | $1,093 | | Share-based compensation expenses | $1,362 | $1,533 | $9,869 | $5,329 | | Adjusted EBITDA - before issuance-related costs | $(6,951) | $(4,592) | $(16,098) | $(16,366) | | Issuance-related costs | — | — | $2,088 | — | | Adjusted EBITDA - after issuance-related costs | $(6,951) | $(4,592) | $(14,010) | $(16,366) | Loss Per Share Reconciliation This table reconciles GAAP Loss per Share to Non-GAAP Loss per Share, adjusting for preferred share dividends and issuance costs Reconciliation of GAAP to Non-GAAP Loss Per Share (in thousands, except per share data) | Metric | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :----- | :------ | :------ | :------ | :------ | | GAAP Net Loss | $(7,973) | $(6,011) | $(26,534) | $(19,635) | | Accrued dividend related to Preferred Shares | — | $(3,662) | $(11,330) | $(14,330) | | Total Loss used for computing GAAP Loss per share | $(7,973) | $(9,673) | $(37,864) | $(33,965) | | GAAP Loss per share | $(0.08) | $(0.90) | $(1.15) | $(3.25) | | Non-GAAP Net loss (adjusted for issuance-related costs) | $(7,973) | $(6,011) | $(20,576) | $(19,635) | | Non-GAAP Loss per share | $(0.08) | $(0.56) | $(0.62) | $(1.88) | - All Preferred Shares were converted into Ordinary Shares as of September 29, 2021[35] Corporate Information Conference Call Information The company hosted a conference call on March 2, 2022, to discuss its financial results and business outlook - Conference call held on Wednesday, March 2, 2022, at 8:30 a.m. Eastern Time (ET)[9] - Access was available via dial-in numbers for the U.S., UK, Israel, and other locations[9] - A live webcast of the conference call was available via the investor relations section of Valens' website, with a replay available after the call[10] Annual Financial Report Announcement The company announced the filing and availability of its 2021 Annual Report on Form 20-F with the SEC - The Annual Report on Form 20-F for 2021 was filed with the U.S. Securities and Exchange Commission on March 2, 2022[11] - The report is available in the investor relations section of Valens' website[11] - Hard copies of the 2021 Annual Report will be provided free of charge upon request[11] Contact Information This section provides contact details for investor relations and media inquiries - Investor Relations Contact: Daphna Golden, VP Investor Relations, Valens Semiconductor Ltd., investors@valens.com[36] - Media Contact: Moriah Shilton, Financial Profiles, Inc., US: +1 310-622-8251, Valens@finprofiles.com[36]