Valens Semiconductor Ltd.

Good morning. My name is Hila, and I will be your conference operator today. At this time, I would like to welcome everyone to Valence Semiconductor's fourth quarter and full year 2025 early conference call and webcast. All participant lines have been placed in a listen-only mode. Opening remarks by Valence Semiconductor Management will be followed by a question and answer session. I will now turn the call over to Michal Ben-Ali, Investor Relations for Valence Semiconductor. Please go ahead.

Thank you and welcome everyone to Valence Semiconductor's fourth quarter and full year 2025 earnings call. With me today are Yoram Senninger, Chief Executive Officer, and Guy Nathanson, Chief Financial Officer. Earlier today, we issued a press release that is available on the Investor Relations section of our website under investors.valence.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 25 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 this 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, Maiki. Hello, everyone, and thank you for joining us. I'd like to begin this call by introducing myself to you all. My name is Yor. I come to Valence with over 25 years of leadership experience in global high-tech companies. My background is in building and scaling technology companies for key growth phases, and that's exactly what I intend to do here at Valence. I'm really excited to have joined this company. I've only been here a few months, but it's already clear to me that Valence has exceptional technology, a strong executive team, dedicated and professional employees, and very compelling opportunity ahead. Before I dive into Q4 numbers and our annual overview, I want to take this opportunity, my first Valence earnings report, to present you with my initial thoughts about the company and to set expectations around Valence growth in the years ahead. This company has delivered some remarkable achievements over the years. We created the HDBaseT standard and founded the HDBaseT Alliance, which boasts over 200 member companies. We sell to nearly all the leading players across the audio-video industry, supporting their innovations across various verticals they serve. In the automotive market, We are a long-time supplier of chips for Mercedes-Benz, powering the state-of-the-art MBUX infotainment system. We were a key contributor to the NIPI AFI standard, and we've become a pillar within the growing AFI ecosystem, achieving four design wins for the next generation ADAS systems. We feel confident that both the audio-video and automotive industries represent significant long-term growth pillars for the company, and the first number I want to share with you is a new growth projection. We expect that in 2026, our revenues will reach between $75 and $77 million. The midpoint reflects growth approximately 8% over last year. While we expect to maintain growth in 2026, the pace and extent of the growth may be affected by microeconomic conditions and the pace of adoptions of new technologies, which could continue to reduce visibility and increase uncertainty. Given the current environment and reduced visibility beyond the near term, we will provide single-year growth projections going forward. My outlook for Valence and my strategy for achieving our growth target is as follows. From now on, we are concentrating our resources on our core businesses, audio, video, and automotive. Those are the markets where Valence brings unmatched technology leadership and where we see sustained profitable growth opportunities. That said, we remain proactive, focusing on seizing large revenue-generating opportunities that are raised in additional verticals that require high performance connectivity solutions in challenging environments. But our priority will be to ensure discipline, execution, profitability, and innovation within our core markets. With that as a starting point, I'd like now to dive into our Q4 and 2025 full year performance. We are pleased to report a strong fourth quarter, well above our initial expectation. We delivered revenues of $19.4 million, exceeding our guidance range of $18.2 to $18.9 million. As customer demand exceeded expectations in the audio-video market, this marked the seventh consecutive quarter of growth for our company. Gap gross margin for Q4 2025 came in at 60.5%, better than the guidance, and adjusted EBITDA loss was $4.3 million within the guidance range. Our full year revenues for 2025 were $70.6 million. Also exceeding our guidance range are 69.4 to $70.1 million. Gas gross margin for the full year 2025 came in at 62.4% and adjusted EBITDA loss was $16.9 million, both above our guidance. Looking ahead to Q1, 2026, we expect revenue to be in the range of $16.3 to $16.7 million. Beyond the numbers, I want to begin our quarterly discussion with a review of one of our core growth engines, audio-video. Valence is offering two unique and cutting-edge chipsets that fill market gaps for this industry, the VS3000 and the VS6320. Let's start with the VS3000, the only chip on the market that can extend uncompressed HDMI 2.0 over widely used category cables. is the solution of choice for products that need to reliably send high-resolution video over long distances. Think projectors, think lecture halls and auditoriums, think boardrooms, warehouses, sports bars, casinos, anything that requires multiple display and high-quality video. Our VS3000 is basically the most suitable option. In 2025, our VAS3000 finally transitioning from high-end only to more mainstream products. Major companies brought state-of-the-art VAS3000 powered products to market, including Lidl's, Crestron, Extra, Vermeer, and Atlona. This translated into bounce-back years, marking a nearly 100% increase in VAS3000 sales from 2024. This is great news for Valence. As the VS3000 is the most advanced HD-based T-chip, we offer and is a pillar of our growth opportunity in our core audio-video market. As 4K video becomes more mainstream and as lower-quality solutions become less viable for professional deployment, we expect VS3000 sales to continue to ramp up as we move further into 2026 and beyond. The second cutting edge chip I want to discuss in relation to the audio video market is our newest, the VS6320. As a reminder, this is the first and only high performance USB 3.2 extension solution built on a dedicated chip. While USB 2.0 has long been sufficient for extending basic peripherals such as keyboards, mice, audio devices, and early generation cameras, USB 3.2 is increasingly being used in this market to enable a new generation of products, high resolution USB cameras, interactive displays, and more. Applications include digital signage in airports, interactive kiosks in museums, video walls in retail stores, telemedicine setups in hospitals or high-end conference rooms. Released in 2024, sales of the VS6320 grew nearly 25% during 2025. Last year, many market leaders released products based on this chipset, including whole technologies, Innogeny, and Pro-ITAV. In January, In 2026, one of the world's top three pro EV manufacturers, whose name I cannot reveal at this time, released to market a new series of USB 3.0 extenders targeting meeting rooms based on this chip. We expect the VS6320 to be another growth engine for us in 2026 and beyond. As the market continues to break past the limitations of USB Now, I'd like to turn to our other core business, automotive. Our opportunity in automotive is dominated by the VA7000 chipset, which offers high-performance connectivity for cameras and radars, used in autonomous driving. It is the first chipset on the market to comply with the MIPI-A5 standard for high-speed sensor connectivity. to say when we're talking about ADAS and autonomous systems, errors could lead to catastrophic consequences for drivers, passengers, and pedestrians alike, which is why our VA-7000 offers best-in-class noise immunity, reaching error rates that are orders of magnitude lower than what our competition can support. MIPI-85 has achieved important milestones over recent months, We secured a new design wing for the VA7000 chipset, which will be integrated into an ADAS system of a premium global automotive OEM serving the Chinese market. The deal brings Valence to four VA7000 A5 design wings globally and reinforces the connectivity standard as a forerunner for next generation ADAS and autonomous systems. We also announced our partnerships around our VA7000 A5 chipset. Mobileye, a global leader in ADAS systems, selected our chips for the central to compute connectivity infrastructure underpinning the most advanced ADAS product. We successfully completed interoperability testing with seven vendors of A5 silicon. We supported Japanese company Sakai Rican as they unveiled a 7,000 base eMirror with an order of magnitude more imaging data than other solutions on the market. And in Q1, 2026, a major Korean supplier MCNX launched the industry first automotive grade QHD front and rear cameras over low cost channels based on our chipset. MIPI AFI reached other milestones as well. A different silicon vendor announced its own AFI design win with a major Chinese OEM. Sony Semiconductor Solutions introduced to the market the first sensor in the world which integrated AFI extension, and the AFI ecosystem continued to grow, with new products and integrations being developed by major players such as OmniVision, Panasonic, and Qualcomm. The industry is buying into AFI standards, and Valencia is recognized as the go-to leader within the ecosystem, positioning us well for the future design wins. Of course, our first generation of automotive chipsets, the VA6000, has been in mass production since 2021, with Mercedes-Benz. The contract generated revenues of $18.4 million during 2025, a 12% drop from 2024 revenues, derived from the decline in the number of products units sold by us to full installations in the citizens cloud coupled with an erosion in the average selling price i would like to conclude by mentioning the difficult but necessary decision to reduce our workforce in late january we announced that we will be reducing our workforce by approximately 10 percent across various departments which is expected to save around five million dollars annually in operating expenses the reduction was targeted and disciplined designed to optimize our cost structure streamline operation and sharpen execution across the company this was not a decision i took lightly valence was built by exceptional people and i'm grateful for the contributions of those who are leaving the company at the same time this step allows us to continue to invest in our core business segments with clarity, urgency, and confidence while maintaining the flexibility to capitalize on the right opportunities as they arise. With that, Guy, please go ahead and discuss our financial performance in more detail.