DALLAS, TX -- February 27th, 2025 -- Valens Semiconductor Ltd.(NYSE:VLN): Stonegate Capital Partners updates their coverage on Valens Semiconductor Ltd. (NYSE:VLN). In FY24, Valens Semiconductor faced significant headwinds, mirroring the broader struggles of the semiconductor industry amid market slowdowns and inventory corrections. Despite these challenges, the Company remained focused on long-term growth, laying the groundwork for what it expects to be a rebound in 2025. Key milestones included securing three design wins with leading European automotive OEMs for its MIPI A-PHY standard-compliant chipsets and acquiring Acroname to accelerate innovation in USB products for industrial and professional AV markets. Additionally, Valens expanded into high-growth verticals such as industrial machine vision and successfully commercialized the VS6320 chipset, which has already attracted over 50 customers. With a newly announced five-year plan aimed at more than quadrupling revenues, Valens is positioning itself for significant expansion as demand for high-speed connectivity solutions rises across multiple industries. 

Company Updates:

Cross-Industry Business: The Company’s Cross-Industry Business (CIB), demonstrated sequential growth in 4Q24, with revenues rising to $11.7M. This is up from $9.4M in 3Q24. On a year-over-year basis, CIB revenues totaled $36.3M, a decline from 68.2% or $57.4M in FY23. The slowdown was primarily driven by excess inventory affecting customer orders, though the Acroname acquisition contributed $3.4M to the segment, supporting Valens' diversification efforts and positioning it for future growth. We expect the inventory challenges to subside though 2025, leading to sequential top-line growth for CIB through the year.

Automotive Segment: The Company’s Automotive segment experienced a decline in 4Q24, generating $5.0M in revenue. This is down from $6.6M in 3Q24 and $6.1M y/y. For the full year, Automotive revenues totaled $21.6M, compared to $26.8M or in FY23. This y/y decline was primarily driven by gradual price erosion and lower unit sales to Mercedes-Benz. Despite these challenges, Valens secured three key design wins with leading European automotive OEMs for its MIPI A-PHY standard-compliant chipsets, reinforcing its position in the evolving ADAS and in-vehicle connectivity markets. The Company has reiterated its confidence that providing the market with MIPI A-PHY standard-compliant offerings will continue to strengthen VLN’s position.

Growth Strategy: In 2025, the Company expects a partial recovery in professional audio-video, driven by VS6320 adoption in video conferencing, and design wins in industrial machine vision with its VS6320 and VA7000 chipsets. In automotive, Valens seeks further OEM design wins to strengthen its ADAS and connectivity solutions. Additionally, the Company plans to pursue synergetic acquisitions, targeting at least one deal. These initiatives position Valens for sustained growth in both existing and emerging markets.

Strong Financial Position: Valens has a robust balance sheet, with $35.4M in cash, which when combined with its $95.5M in short term deposits give the Company $131.0M in cash and cash equivalents, to support its growth initiatives. Additionally, the Company has improved its working capital position, reducing inventory to $10.1M as of FY24 end, down from $13.8M seen in FY23. Recently, Valens launched a new $15.0M share repurchase program after completing its $10.0M program in late 2024, underscoring confidence in long-term growth and shareholder value.

Guidance: The Company expects 1Q25 revenue of between $16.3M to $16.6M and adj. EBTIDA of ($4.5)M to ($4.2)M. Gross Margin in 1Q25 is expected to range between 60.8% and 61.3%. 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 $4.42 to $5.61 with a mid-point of $4.94. Our EV/Revenue valuation results in a range of $4.63 to $5.48 with a mid-point of $5.05.

About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking services for public and private companies.

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