DALLAS, TX -- May 8th, 2025 -- Valens Semiconductor Ltd.(NYSE:VLN): Stonegate Capital Partners updates their coverage on Valens Semiconductor Ltd. (NYSE:VLN). Valens Semiconductor achieved robust results in 1Q25, with revenues of $16.8M, surpassing both its prior guidance of $16.3-$16.6M and the previous quarter's revenue of $16.7M. This marks a significant year-over-year growth from 1Q24 revenue of $11.6M. This performance reflects stabilization and initial recovery in market conditions, with the Company successfully navigating challenges that previously impacted industry-wide semiconductor demand and inventory corrections.
Company Updates:
Cross-Industry Business: The Cross-Industry Business (CIB) segment accounted for ~70% of total revenues, generating $11.7M, flat sequentially but notably higher compared to $7.2M reported in 1Q24. The stability and growth in this segment was highlighted by increasing adoption of Valens' VS6320 chipset in the video conferencing market, supported by its standardized design which facilitates smaller form factor camera modules. Additionally, Valens chips offer the highest video resolution, enhancing precision for automated machine vision solutions. The chips robust EMI resilience ensures reliable 24/7 operation even in noisy electromagnetic environments like factory floors, while the cost-effective nature of their operation over low-cost cables continues to enable significant overall system cost reductions.
Automotive Segment: Valens’ Automotive segment reported revenues of $5.1M, reflecting a modest sequential improvement from 4Q24 of $5.0 million and a y/y increase from $4.4M. This segment benefited from strengthened market positions through strategic design wins using the MIPI A-PHY standard-compliant chipsets, particularly following successful interoperability testing with seven other silicon vendors. Automotive gross margins notably improved to 48.4%, primarily due to optimized product costs. Despite the gradual pace of ADAS adoption, Valens has diversified its automotive client base beyond reliance on Mercedes-Benz, signaling ongoing expansion and reduced dependency on any single customer.
Growth Strategy: Throughout the first quarter, VLN reinforced its strategic position through several high-profile partnerships and initiatives. These include partnerships with RGo Robotics and CHERRY Embedded Solutions aimed at designing optimized AI robotic systems for the machine vision market. The Company further strengthened its automotive partnerships, notably with Mobileye, enhancing its position in high-automated and autonomous vehicle connectivity. The Company also leveraged its technological capabilities in showcasing its leadership in industrial machine vision, securing critical design wins and setting the stage for long-term growth.
Strong Financial Position: VLN ended the first quarter with a solid financial standing, holding $112.5M in cash, cash equivalents, and short-term deposits, despite a $9.6M expenditure on share repurchases. The completion of a $10.0M share repurchase program and initiation of another $15.0M program underscore management's confidence in long-term growth and commitment to shareholder returns. While closely monitoring tariff developments and their potential market impacts, Valens maintains zero debt, further underscoring its financial resilience and readiness for future growth opportunities, including strategic acquisitions.
Guidance: The Company expects 2Q25 revenue to range between $16.5M and $16.8M, and adjusted EBITDA loss to range between $(4.9)M and $(4.4)M with gross margins expected between 63.0% and 64.0%. This implies a maintained full year 2025 revenue guidance of $71.0M to $76.0M.
Valuation: We use a DCF Model and EV/Revenue comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $4.51 to $5.72 with a mid-point of $5.04. Our EV/Revenue valuation results in a range of $4.66 to $5.51 with a mid-point of $5.08.
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