Valens Semiconductor Ltd. 2026 Q2 Earnings Call

Please go ahead. Thank you, and welcome everyone to Valens Semiconductor's second quarter 2026 earnings call.

With me today are Yoram Salinger, Chief Executive Officer, and Karine Pinto-Flomenboim, our new Chief Financial Officer. Earlier today, we issued a press release that is available on the investor relations section of our website under investors.valens.com. As a reminder, today's earning call may include forward-looking statements and projections, which do not guarantee future events or performance. These statements are subject to the safe harbor language in today's press release. Please refer to our annual report on Form 20-F filed with the SEC on February 25, 2026, for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy.

We will be discussing certain non-GAAP measures on this call, which we believe are relevant in assessing the financial performance of the business, and you can find reconciliations of these metrics within our earnings release. With that, I will now turn the call over to Yoram.

Thank you, Mikey. Hello, everyone, and thank you for joining us, and welcome to our new CFO, Karine Pinto-Flomenboim, who brings with her extensive financial and operation leadership experience from both public and private technology companies. We are very happy to have you here with us. Since joining Valens, I spent a lot of my time with our teams, our customers, and our partners, and what has struck me most is the depth of the technology we've built and how directly that translates into customer adoption from audio/video products shipping today, to automotive design wins that are advancing towards production. We provide high performance chipsets that are in demand across industries because they offer OEMs a foundation upon which they can build the innovations of the future.

Our technological leadership, combined with our growing commercial momentum, give me confidence in our ability to capitalize on many opportunities that lay ahead. I'll speak more about how this impacts our full-year revenue towards the end of my remarks. I'm happy to share that this quarter, we exceeded the top end of our revenue guidance at $18.1 million. GAAP gross margin for the second quarter came in at 61.5%, well within our guidance, and adjusted EBITDA was a loss of $4.2 million, lower than anticipated compared to our guidance. During the remainder of my remarks, I'd like to highlight the key developments across our business, and I'll start with audio video. Audio video continues to be the core foundation of our business. Our activities here continue to expand steadily, and the momentum we saw this quarter reflects continued customer adoption and commercial traction across our chipsets portfolio.

The revenue growth this quarter came primarily from two chipsets, our legacy VS100 family and our cutting-edge VS3000. We're encouraged that the market continues to find value in our VS100, the first generation of HDBaseT chipsets. For customers looking for next-generation AV platforms, we're happy to see that they're increasingly choosing our VS3000, the only solution for uncompressed HDMI 2 extension over widely deployed category cables. In addition, we saw continued momentum building from our VS6320 chip, which extends USB 3.2. We expect integration of those chipsets to grow as more OEMs adopt higher resolution video and more advanced USB protocols into their designs. In Q2, we saw additional products hit the market based on our most cutting-edge chips, including from leading AV manufacturers Crestron and Extron.

Adoption by two top-tier AV manufacturers like these is exactly the kind of commercial traction that turns technology leadership into recurring revenue and give us confidence in continued growth from these products as we move further into 2026. Beyond these newer products, our broader audio video portfolio also continued to perform well. During the quarter, we announced that Barco selected our HDBaseT chipsets to power its new ClickShare USB-C extension over Cat kit. Barco is one of the most recognized names in collaboration technology, and their flagship ClickShare product is known for its wireless connectivity. The company's decision is a clear signal of market demand for higher performance wired connectivity and of Valens' position as a leader in this space. We see wins like this as further validation that our technology continues to add value as collaboration systems evolve.

At this point, I'd like to mention an important initiative we undertook aimed at converting our technology into new revenue opportunities. When I took the helm at Valens, we quickly established an internal task force focused on identifying new opportunities that could be pursued with minimal incremental R&D investment beyond the chip we are currently selling and with accelerated time to market. The team exceeded my expectations. One of the best examples came from our VS6320. With software enhancement, we created a new offering that addressed a clear market need. Rather than simply selling the chip, Valens developed a joint reference design for USB3 and 4K video by combining the VS6320 with a companion chip and introduced it to leading ODMs customers. We also worked with those customers to design firmware tailored to their specific needs.

The company has already seen millions of dollars in bookings across multiple customers, several of which have already progressed to sampling, completed qualification, and are now beginning volume production. This is an elegant production-ready solution for extending both USB3 and 4K video. It also provides a clear bridge to the next step of our roadmap. We are currently developing a new single-chip solution that will integrate these capabilities into one package. Instead of pairing the VS6320 with companion chip from other vendors, OEMs will be able to achieve the same functionality with a single device, simplifying system design, reducing component count, lowering cost, and streamlining integration. The strong market interest in our USB3 and 4K reference design reinforces our conviction that the chip's integrated feature set will address a real and growing customer need.

Before I move to our automotive business, I would like to mention our presence at the InfoComm trade show, one of the marquee events in the Pro AV industry, which took place in Las Vegas in June. Both the VS3000 and the VS6320 generated strong interest from OEMs, ODMs, and ecosystem partners. Throughout the show, we held large number of strategic meetings that resulted in new business opportunities, expanded engagements, and a robust pipeline of follow-up activities. Overall, the event further strengthened our confidence in our audio/video strategy and growing demand for our technology and our ability to translate that demand into future design wins and revenue growth. Let's turn now to the automotive industry. I would like to start this section with the exciting news that we are welcoming Dean Martin as the new Head of Automotive Business Unit effective on September 1st.

I had the pleasure of working with Dean for more than a decade at Red Bend, later acquired by Harman, and saw firsthand his exceptional ability to turn innovative technologies into significant commercial success. Dean has a track record of securing major design wins, leading global automakers, and building the customer relationships needed to support a long-term growth. On that note, I would like to thank Adar Segal, who is stepping down from his position, for his significant contribution to Valens over the recent years. Now turning to our performance in automotive during Q2. As you know, this industry represents one of the most important long-term growth opportunities for Valens. As vehicles add more cameras, radars, and other sensors to support ADAS and autonomous driving, the industry needs a new class of high performance, reliable, standardized connectivity.

We believe Valens is well positioned to become a leading provider of that connectivity for the years to come. At the center of this opportunity is our VA7000 chipset, which offers high-performance connectivity for cameras and radars used in ADAS and autonomous driving. The VA7000 is the first chipset on the market to comply with the MIPI A-PHY standard. We now have four design wins for our A-PHY chipsets, and one of our primary focus is on executing those programs successfully. I am pleased to say that all four projects are progressing according to plan, and our teams are working closely with customers to support their development towards production. As a reminder, automotive programs follow long development and production cycles, often several years from design wins to volume production. But we expect to see revenues from these projects ramping up during 2027.

While initial revenue represents an important milestone, the larger opportunities will develop as these programs advance into volume production over time. We continue to participate in several evaluation processes at various stages with multiple OEMs, providing additional opportunities to expand our design wins for solid. To conclude, we delivered a strong execution during the past quarter. Building on the continued strength of the professional AV foundation, we also made meaningful progress across our automotive programs, while our technology leadership continued to translate into growing commercial momentum, positioning us well for future growth. As a result of our strong first half performance and the visibility we now have into the remainder of the year, we are raising our full year revenue guidance to between $78 million and $81 million, up from our previous guidance range of $75 million to $77 million.