Valens Semiconductor .(VLN) - 2025 Q1 - Quarterly Report

Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of March 31, 2025, Valens Semiconductor's total assets were $154.6 million, a decrease from $172.2 million at the end of 2024, primarily due to a reduction in short-term deposits. Total liabilities also decreased to $26.0 million from $29.5 million, while total shareholders' equity declined to $128.6 million from $142.7 million, mainly impacted by share repurchases and the net loss for the period Balance Sheet Summary (in thousands USD) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $136,699 | $153,903 | | Cash and cash equivalents | $40,997 | $35,423 | | Short-term deposits | $71,543 | $95,532 | | Total Assets | $154,562 | $172,152 | | Total Current Liabilities | $16,879 | $20,326 | | Total Liabilities | $25,955 | $29,464 | | Total Shareholders' Equity | $128,607 | $142,688 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the first quarter of 2025, Valens reported revenues of $16.8 million, a 45.6% increase year-over-year from $11.6 million. Gross profit grew to $10.6 million from $6.8 million. Despite higher operating expenses, the operating loss narrowed to $9.5 million from $11.3 million, and the net loss improved to $8.3 million, or ($0.08) per share, compared to a net loss of $10.0 million, or ($0.10) per share, in the prior-year period Q1 2025 vs. Q1 2024 Performance (in thousands USD, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $16,828 | $11,559 | | Gross Profit | $10,582 | $6,815 | | Total Operating Expenses | ($20,038) | ($18,104) | | Operating Loss | ($9,456) | ($11,289) | | Net Loss | ($8,308) | ($10,042) | | Basic and diluted net loss per share | ($0.08) | ($0.10) | | Total Comprehensive Loss | ($8,850) | ($10,042) | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $142.7 million at the beginning of 2025 to $128.6 million at the end of Q1 2025. The reduction was primarily driven by a net loss of $8.3 million and the repurchase of ordinary shares amounting to $9.6 million. These decreases were partially offset by $4.2 million in stock-based compensation Changes in Shareholders' Equity for Q1 2025 (in thousands USD) | Description | Amount | | :--- | :--- | | Balance as of January 1, 2025 | $142,688 | | Net loss for the period | ($8,308) | | Repurchase of ordinary shares | ($9,585) | | Stock based compensation | $4,166 | | Exercise of options and vesting of RSUs | $188 | | Change in unrealized losses on cash flow hedges | ($542) | | Balance as of March 31, 2025 | $128,607 | Condensed Consolidated Statements of Cash Flows In Q1 2025, the company used $7.6 million in cash from operating activities. Investing activities provided $22.7 million, largely from maturities of short-term deposits. Financing activities used $9.4 million, mainly for share repurchases. Overall, cash and cash equivalents increased by $5.6 million, ending the quarter at $41.0 million Cash Flow Summary for Q1 2025 vs Q1 2024 (in thousands USD) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,611) | ($1,390) | | Net cash provided by investing activities | $22,651 | $19,109 | | Net cash (used in) provided by financing activities | ($9,397) | $126 | | Increase in cash and cash equivalents | $5,574 | $17,839 | | Cash and cash equivalents at end of period | $40,997 | $35,100 | Notes to the Condensed Consolidated Interim Financial Statements The notes provide detailed explanations of the company's accounting policies, the Acroname business combination, inventory levels, commitments and contingencies, derivative instruments, share repurchase programs, stock-based compensation, segment performance, and subsequent events. These notes are integral to understanding the condensed consolidated financial statements Note 1 - General Valens Semiconductor, an Israeli company trading on the NYSE under 'VLN', is a leading provider of semiconductor products for the Audio-Video and Automotive industries. The company notes that the ongoing regional conflict in Israel has not materially affected its operations or financial results to date but continues to monitor the situation - The company operates in the Audio-Video and Automotive semiconductor markets, known for its HDBaseT and advanced PHY technologies[15] - Despite the conflict in Gaza, Lebanon, and the broader region, the company states that its operations and financial results have not been materially affected as of the report date, though it acknowledges the situation is beyond its control[15] Note 2 - Summary of Significant Accounting Policies The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC regulations for interim reporting. The company confirms no material changes to its significant accounting policies from the year ended December 31, 2024. It is currently evaluating the potential impact of new accounting standards related to income tax and expense disclosures - The financial statements are prepared under U.S. GAAP for interim reporting and should be read with the audited 2024 annual financial statements[16][18] - There have been no material changes in the company's significant accounting policies since the last annual report[19] Note 3 - Business Combination On May 31, 2024, Valens acquired 100% of Acroname Inc. for a total consideration of $11.2 million, including $9.2 million in cash and a $2.0 million fair value earnout liability. The acquisition is aimed at leveraging Acroname's automation and control technologies. For Q1 2025, Acroname contributed $1.43 million in revenue and a net loss of $0.45 million to Valens' consolidated results Acroname Acquisition Consideration (in thousands USD) | Component | Value | | :--- | :--- | | Cash payment | $9,160 | | Fair value of earnout liability | $2,036 | | Total consideration | $11,196 | - The acquisition includes a potential earnout payment of up to $7.2 million in cash, contingent on development and financial targets[23] - In Q1 2025, Acroname contributed $1,433 thousand in revenues and a net loss of $445 thousand to the consolidated statements[25] Note 4 - Inventories Total inventories increased to $10.9 million as of March 31, 2025, from $10.2 million at the end of 2024. The company recorded no inventory write-downs in Q1 2025, compared to $268 thousand in Q1 2024 Inventory Breakdown (in thousands USD) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Work in process | $5,289 | $4,547 | | Finished goods | $5,569 | $5,608 | | Total | $10,858 | $10,155 | - Inventory write-downs were $0 in Q1 2025, a significant decrease from $268 thousand in Q1 2024[28] Note 5 - Commitments and Contingent Liabilities As of March 31, 2025, the company had noncancelable purchase obligations of $7.1 million with manufacturing contractors and $1.7 million for IP licenses. A customer has filed a claim for €2.1 million ($2.3 million) related to allegedly damaged chips from a production incident, for which the company has recorded a provision - Total open purchase orders with manufacturing contractors were approximately $7.1 million[29] - A customer submitted a claim for €2,096 thousand ($2,268 thousand) for damaged chips. The company has recorded a provision and is in discussions with the customer and insurers[32][33] Note 6 - Other Current Liabilities Other current liabilities totaled $8.3 million as of March 31, 2025, slightly down from $8.4 million at year-end 2024. The largest components are accrued vacation at $3.5 million and an estimated accrual of $2.3 million for a batch production incident Breakdown of Other Current Liabilities (in thousands USD) | Liability | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued vacation | $3,503 | $3,166 | | Estimated accrual for production incident | $2,268 | $2,182 | | Accrued expenses | $1,794 | $1,738 | | Other | $792 | $1,598 | | Total | $8,257 | $8,384 | Note 7 - Forfeiture Shares This note details ordinary shares subject to forfeiture based on share price targets not being met. On September 30, 2024, 646,875 ordinary shares were forfeited. The fair value of the remaining forfeiture shares was minimal at $1 thousand as of March 31, 2025 - On September 30, 2024, a total of 646,875 Ordinary Shares were forfeited because specified price targets were not achieved[38] Note 8 - Earnout Liability The company has an earnout liability related to the Acroname acquisition, with potential payments up to $7.2 million. The fair value of this liability was revalued to $2.6 million as of March 31, 2025, resulting in a $174 thousand charge to operating expenses during the quarter - The earnout liability is tied to the Acroname acquisition, with up to $7.2 million payable upon achieving development and financial targets through 2026[40] - The fair value of the earnout liability increased from $2.41 million to $2.59 million during Q1 2025, resulting in a non-cash expense of $174 thousand[45] Note 9 - Derivatives and Hedging The company uses foreign currency forward contracts to hedge against fluctuations in the USD/ILS exchange rate, primarily for its ILS-denominated payroll expenses. In Q4 2024, it initiated a cash flow hedging program. For Q1 2025, changes in the value of these derivatives resulted in a $542 thousand loss recorded in other comprehensive income - The company uses foreign currency forward contracts to manage exposure to the Israeli Shekel (ILS) for payroll expenses[46][49] - For designated cash flow hedges, an unrealized loss of $542 thousand was recorded in Accumulated Other Comprehensive Income for Q1 2025[50] Note 10 - Treasury Shares The company has two active share repurchase programs. The first, a $10 million program initiated in December 2024, was completed by March 31, 2025. A second, $15 million program was initiated in February 2025, under which $1.2 million of shares were repurchased during the quarter - A $10 million share repurchase program was completed, with 3.3 million shares repurchased in total[55] - A second $15 million share repurchase program was initiated in February 2025, with 553,747 shares repurchased for $1.2 million as of March 31, 2025[55] Note 11 - Stock-Based Compensation Total stock-based compensation expense for Q1 2025 was $4.2 million, up from $3.8 million in Q1 2024. This was composed of $3.8 million from RSUs and $0.4 million from stock options. As of March 31, 2025, there was $27.5 million in unrecognized compensation cost related to unvested RSUs and $0.9 million related to unvested stock options Stock-Based Compensation Expense (in thousands USD) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | RSUs Expense | $3,783 | $2,872 | | Stock Options Expense | $383 | $892 | | Total | $4,166 | $3,764 | - As of March 31, 2025, there were 11.7 million RSUs and 10.8 million stock options outstanding[54][59] - Unrecognized compensation cost related to unvested RSUs totaled approximately $27.5 million, to be expensed over a weighted-average period of 2.65 years[59] Note 12 - Net Loss Per Ordinary Share Basic and diluted net loss per share was calculated based on a net loss of $8.3 million and weighted average shares of 105.3 million for Q1 2025. This resulted in a net loss per share of ($0.08). Potentially dilutive securities like options, warrants, and RSUs were excluded as their effect would have been anti-dilutive Net Loss Per Share Calculation (Q1 2025) | Metric | Value | | :--- | :--- | | Net loss (in thousands USD) | ($8,308) | | Weighted average shares | 105,255,959 | | Basic and diluted net loss per share | ($0.08) | - A significant number of securities, including over 10.6 million options and 10.2 million RSUs, were excluded from the diluted EPS calculation because they were anti-dilutive[63] Note 13 - Financial Income (Expenses), Net The company reported net financial income of $1.24 million for Q1 2025, consistent with the prior-year period. The income was primarily driven by $1.23 million in interest income from short-term deposits, partially offset by foreign currency exchange differences Financial Income (Expenses), Net (in thousands USD) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Interest income on short-term deposits | $1,234 | $1,767 | | Realized/unrealized gains on derivatives | $204 | - | | Foreign currency exchange differences | ($140) | ($526) | | Other | ($60) | ($7) | | Total financial income, net | $1,238 | $1,234 | Note 14 - Segment and Revenue by Geography and Major Customer Valens operates in two segments: Cross Industry Business (CIB) and Automotive. In Q1 2025, CIB revenues were $11.8 million with an operating loss of $3.5 million, while Automotive revenues were $5.1 million with an operating loss of $5.9 million. Geographically, Hungary, the US, Portugal, and China were the largest markets. The company has significant customer concentration, with its top customer accounting for 13% of revenues Segment Performance Q1 2025 (in thousands USD) | Segment | Revenues | Gross Profit | Operating Loss | | :--- | :--- | :--- | :--- | | CIB | $11,753 | $8,124 | ($3,523) | | Automotive | $5,075 | $2,458 | ($5,933) | | Consolidated | $16,828 | $10,582 | ($9,456) | Top 5 Revenue Geographies Q1 2025 (in thousands USD) | Geography | Revenue | | :--- | :--- | | Hungary | $2,880 | | United States | $2,686 | | Portugal | $2,237 | | China | $2,221 | | Hong Kong | $1,815 | - Revenue is concentrated, with Customer A accounting for 13% of revenues in Q1 2025. Four customers (A, B, C, D) represented 62% of accounts receivable at quarter-end[73] Note 15 - Related Party Transactions During Q1 2025, the company granted 511,925 stock options and 549,654 RSUs to executive officers and board members. The fair value of these grants was $0.5 million for the options and $1.2 million for the RSUs, which will be recognized as compensation expense over their vesting periods - Granted 511,925 stock options and 549,654 RSUs to executive officers and Board members in Q1 2025[76][77] - The total fair value of these grants is approximately $1.7 million, to be recognized as expense over a 1-4 year vesting period[77] Note 16 - Subsequent Events After the quarter ended, between April 1 and May 5, 2025, the company continued its second share repurchase program, buying an additional 1,568,611 ordinary shares for a total of $3.7 million - Subsequent to March 31, 2025, the company purchased an additional 1.6 million shares for $3.7 million as part of its ongoing buyback program[78]