Valens Semiconductor .(VLN) - 2022 Q4 - Annual Report

Fourth Quarter and Full Year 2022 Results Overview Executive Summary and Key Highlights Valens Semiconductor achieved record revenues in Q4 and FY2022, driven by strong audio-video and automotive growth, with adjusted EBITDA breakeven projected by year-end 2023 CEO's Commentary CEO Gideon Ben-Zvi highlighted record 2022 revenues and automotive expansion, projecting significant 2023 automotive growth and adjusted EBITDA breakeven by year-end - Record annual revenue of $90.7 million and Q4 revenue of $23.5 million in 2022, primarily driven by better-than-expected audio-video product revenue[2] - Annual automotive sales doubled in 2022, primarily due to expansion into more Mercedes-Benz models[2] - Automotive revenue is expected to be significantly higher in 2023 compared to 2022[3] - The company is on track to achieve adjusted EBITDA breakeven by the end of 2023[3] Financial and Business Highlights Valens Semiconductor achieved record Q4 and full-year revenues with significant growth in audio-video and automotive, maintaining healthy gross margins and improving adjusted EBITDA loss Q4 2022 and Full Year Financial Highlights | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Revenues (in $M) | 23.5 | 20.7 | 90.7 | 70.7 | | GAAP Gross Margin | 68.3% | 71.2% | 69.9% | 71.6% | | Non-GAAP Gross Margin | 69.2% | 71.5% | 70.7% | 71.8% | | GAAP Net Loss (in $M) | (7.3) | (8.0) | (27.7) | (26.5) | | Adjusted EBITDA Loss (in $M) | (4.6) | (7.0) | (14.9) | (16.1) | | Audio-video revenues (in $M) | N/A | N/A | 74.5 | 62.8 | | Automotive revenues (in $M) | N/A | N/A | 16.2 | 7.9 | - As of December 31, 2022, the company had $163.7 million in working capital, including $148.4 million in cash, cash equivalents, and short-term deposits, with no debt[9] - Audio-video business successfully launched new products like VS3000, USB, and power extenders, driving revenue growth in enterprise, education, and medical sectors[9] - Automotive business doubled revenue in 2022, with VA6000 chipsets integrated into most Mercedes-Benz models and the VA7000 MIPI A-PHY compliant chipset family moving towards mass production[9] Financial Outlook Valens Semiconductor provides Q1 and full-year 2023 financial guidance, projecting continued revenue growth, slightly lower gross margins, and reaffirming adjusted EBITDA breakeven by year-end 2023 Q1 2023 Guidance The company expects Q1 2023 revenues between $23.6 million and $23.8 million, with gross margins of 63.0% to 63.4% and adjusted EBITDA loss between $(6.5) million and $(5.9) million Q1 2023 Financial Guidance | Metric | Q1 2023 Guidance | | :------------------- | :----------------- | | Revenues | $23.6M - $23.8M | | Gross Margin | 63.0% - 63.4% | | Adjusted EBITDA Loss | $(6.5)M - $(5.9)M | - Some customers are expected to deplete their accumulated inventory during the first half of the year[8] Full Year 2023 Guidance The company projects FY2023 revenues between $97 million and $100 million, with gross margins of 62.0% to 62.7%, and automotive revenue share increasing to 27%-29% from 18% in 2022 FY 2023 Financial Guidance | Metric | FY 2023 Guidance | | :------------------- | :----------------- | | Revenues | $97M - $100M | | Gross Margin | 62.0% - 62.7% | | Adjusted EBITDA Loss | $(15.4)M - $(13.6)M | - Automotive revenue is expected to increase from 18% of total annual revenue in 2022 to 27%-29% in 2023[10] - The company is on track to achieve adjusted EBITDA breakeven by the end of 2023 and generate positive cash flow starting in 2024[11] About Valens Semiconductor Valens Semiconductor is a leading provider of high-speed connectivity solutions for audio-video and automotive industries, with HDBaseT® as a dominant AV standard and automotive chipsets driving ADAS and MIPI A-PHY adoption - Valens Semiconductor is a leading provider of high-speed connectivity solutions for the audio-video and automotive markets[1][17] - HDBaseT® technology is the dominant standard in the audio-video market, with tens of millions of Valens chipsets integrated into thousands of products[17] - Valens Semiconductor's automotive chipsets are key enablers for ADAS and autonomous driving, with its advanced technology forming the foundation of the MIPI A-PHY industry standard[17] Summary of Financial Results GAAP and Non-GAAP Key Metrics This section provides an overview of Valens Semiconductor's key financial performance metrics for Q4 and full-year 2022, including revenues, gross profit, net loss, and adjusted EBITDA, presented in both GAAP and non-GAAP formats Summary of Financial Results (Q4 and Full Year 2022) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Revenues | $23,473 | $20,739 | $90,715 | $70,684 | | Gross Profit | $16,030 | $14,767 | $63,390 | $50,579 | | Gross Margin | 68.3% | 71.2% | 69.9% | 71.6% | | Net Loss | $(7,317) | $(7,973) | $(27,667) | $(26,534) | | Working Capital | $163,721 | $183,332 | $163,721 | $183,332 | | Cash, Cash Equivalents and Short-Term Deposits | $148,387 | $174,359 | $148,387 | $174,359 | | Net Cash Used in Operating Activities | $(5,831) | $(11,380) | $(22,095) | $(21,609) | | Non-GAAP Gross Margin | 69.2% | 71.5% | 70.7% | 71.8% | | Adjusted EBITDA | $(4,610) | $(6,951) | $(14,903) | $(16,098) | | Non-GAAP Loss Per Share | $(0.03) | $(0.06) | $(0.17) | $(0.47) | Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations The condensed consolidated statements of operations detail Valens Semiconductor's revenues, cost of revenues, gross profit, operating expenses, and net loss for Q4 and full-year 2022 compared to 2021, showing increased revenues and gross profit alongside higher operating expenses Condensed Consolidated Statements of Operations (Q4 and Full Year) | Metric (in $ thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | REVENUES | 23,473 | 20,739 | 90,715 | 70,684 | | COST OF REVENUES | (7,443) | (5,972) | (27,325) | (20,105) | | GROSS PROFIT | 16,030 | 14,767 | 63,390 | 50,579 | | TOTAL OPERATING EXPENSES | (24,130) | (23,392) | (91,759) | (77,645) | | OPERATING LOSS | (8,100) | (8,625) | (28,369) | (27,066) | | NET LOSS | (7,317) | (7,973) | (27,667) | (26,534) | | BASIC AND DILUTED NET LOSS PER ORDINARY SHARE | $(0.07) | $(0.08) | $(0.28) | $(1.15) | Condensed Consolidated Balance Sheets The condensed consolidated balance sheets present Valens Semiconductor's financial position as of December 31, 2022, compared to 2021, showing a slight decrease in total assets, increased total liabilities, and reduced shareholders' equity Condensed Consolidated Balance Sheets (Year-End) | Metric (in $ thousands) | December 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------------ | :------------------ | | TOTAL CURRENT ASSETS | 188,510 | 199,031 | | TOTAL LONG-TERM ASSETS | 7,149 | 3,569 | | TOTAL ASSETS | 195,659 | 202,600 | | TOTAL CURRENT LIABILITIES | 24,789 | 15,699 | | TOTAL LONG-TERM LIABILITIES | 3,429 | 4,704 | | TOTAL LIABILITIES | 28,218 | 20,403 | | TOTAL SHAREHOLDERS' EQUITY | 167,441 | 182,197 | - Cash and cash equivalents decreased from $56,791 thousand in 2021 to $20,024 thousand in 2022[28] - Inventory significantly increased from $9,322 thousand in 2021 to $23,816 thousand in 2022[28] Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows indicate Valens Semiconductor used more cash in operating activities in 2022, primarily due to increased net loss and inventory, with significant cash used in investing activities Condensed Consolidated Statements of Cash Flows (Q4 and Full Year) | Metric (in $ thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Net cash used in operating activities | (5,831) | (11,380) | (22,095) | (21,609) | | Net cash used in investing activities | (6,447) | (104,065) | (11,729) | (84,163) | | Net cash provided by (used in) financing activities | 289 | (20,087) | 822 | 135,431 | | DECREASE IN CASH AND CASH EQUIVALENTS | (11,881) | (134,317) | (36,767) | 30,475 | | CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 20,024 | 56,791 | 20,024 | 56,791 | - A significant increase in inventory (changes in operating assets and liabilities) from $(6,163) thousand in 2021 to $(14,494) thousand in 2022 led to increased cash outflow from operating activities[32] Reconciliation of GAAP to Non-GAAP Financial Measures Adjusted EBITDA Reconciliation This section provides a reconciliation of GAAP net loss to adjusted EBITDA for Q4 and full-year 2022 and 2021, showing an improvement in adjusted EBITDA loss in 2022 after excluding non-cash expenses Adjusted EBITDA Reconciliation (Q4 and Full Year) | Metric (in $ thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Net loss | (7,317) | (7,973) | (27,667) | (26,534) | | Change in fair value of Forfeiture Shares | 865 | 173 | (2,907) | 173 | | Financial expense (income), net | (1,684) | (993) | 1,770 | (1,102) | | Income taxes | 41 | 169 | 451 | 407 | | Equity in earnings of investee | (5) | (1) | (16) | (10) | | Depreciation | 361 | 312 | 1,377 | 1,099 | | Stock-based compensation expenses | 3,129 | 1,362 | 12,089 | 9,869 | | Adjusted EBITDA | (4,610) | (6,951) | (14,903) | (16,098) | Non-GAAP Loss Per Share Reconciliation This section provides a reconciliation of GAAP net loss per share to non-GAAP loss per share for Q4 and full-year 2022 and 2021, adjusting for stock-based compensation and other non-cash items Non-GAAP Loss Per Share Reconciliation (Q4 and Full Year) | Metric (in $ thousands, except per share) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | GAAP Net Loss | (7,317) | (7,973) | (27,667) | (26,534) | | Stock based compensation | 3,129 | 1,362 | 12,089 | 9,869 | | Depreciation | 361 | 312 | 1,377 | 1,099 | | Change in fair value of Forfeiture Shares | 865 | 173 | (2,907) | 173 | | Total Loss used for computing Loss per Share (Non-GAAP) | (2,962) | (6,126) | (17,108) | (15,393) | | Non-GAAP Loss per Share (in U.S. Dollars) | $(0.03) | $(0.06) | $(0.17) | $(0.47) | | Weighted average number of shares | 98,632,019 | 97,105,948 | 97,820,782 | 33,031,205 | Additional Information Conference Call Information Valens Semiconductor held a conference call on March 1, 2023, to discuss its Q4 and full-year 2022 financial results and business outlook, with access details provided - The conference call was held on Wednesday, March 1, 2023, at 8:30 AM ET[12] - The conference was accessible via dial-in and webcast through the Investors Relations section of Valens Semiconductor's website[12][13] Forward-Looking Statements This section contains a disclaimer regarding forward-looking statements, emphasizing that they are subject to various risks and uncertainties, and actual results may differ materially - Statements regarding future performance, financial results, exchange rates, contract wins, and future economic and market conditions are forward-looking statements[14] - Forward-looking statements are subject to various risks and uncertainties, including semiconductor industry cyclicality, health epidemics (e.g., COVID-19), competition, supply chain issues, customer relationships, intellectual property, and market fluctuations[16] - Valens Semiconductor expressly disclaims any obligation to update these forward-looking statements[16] Contact Information This section provides contact information for investor relations inquiries, including Valens Semiconductor's VP of Investor Relations and a contact at Financial Profiles, Inc - Investor Relations contact: Daphna Golden, VP Investor Relations, Valens Semiconductor Ltd. (investors@valens.com)[42] - U.S. Media contact: Moriah Shilton, Financial Profiles, Inc. (Valens@finprofiles.com)[42]