Valens looks to acquisitions as markets falls
Israeli chip designer Valens Semiconductor is looking at acquisitions as markets continue to fall.
Valens saw revenues of $13.6m in the second quarter of 2024, down by almost half from $24.2m in Q2 2023. This highlights the fall in the automotive chip market that has also hit companies such as STMicroelectronics and Texas Instruments.
During the quarter, the company made its first acquisition, buying Acroname in Boulder, Colorado, for an initial payment of $7.8m in cash. This will see Valens branch out into automation and control technologies for applications in industrial, Audio-Video, video conferencing rooms, and embedded robotic control systems.
Audio-video revenues accounted for approximately 60% of total revenues at $8.1m compared to $15.5 million in the second quarter of 2023 from ongoing inventory digestion.
Automotive revenues accounted for approximately 40% of total revenues at $5.5 million, compared to $8.7 million in the second quarter of 2023 as a result of lower demand from Mercedes-Benz.
The Acroname deal also includes earn out payments of up to $7.2 million, depending on the achievement of certain revenue and cashflow targets in 2024 and 2025, and development of a certain product by June 2026. It is likely to be followed by more deals.
“On May 31, 2024, we completed the acquisition of Acroname, our first M&A transaction, expanding our position in the industrial and Audio-Video markets,” said Gideon Ben-Zvi, CEO of Valens Semiconductor. “Importantly, our strong balance sheet provides us with the flexibility to move quickly when opportunities arise. Going forward, we expect this highly selective acquisition strategy to complement our organic growth initiatives”
“Our team made solid progress executing against our long-term strategy and capitalizing on growing market demand for our chipsets,” he said. “As a result, our second quarter revenue exceeded our guidance, increasing our confidence in the positive trends we are seeing across the diverse verticals we serve. Our mid- and long-term opportunities remain promising despite short-term industry challenges, including slow inventory digestion in the Audio-Video sector.”
“We continued to see growing interest in the adoption of our latest USB3 extension technology, the VS6320 chipset. Since its introduction late last year, we have engaged with over 50 customers, that are integrating the chipset into a wide variety of products.”
“This momentum validates the VS6320’s groundbreaking technology and high demand for reliable, streamlined, and affordable connectivity. We expect to start generating revenue from this chipset in the second half of 2024, before ramping up further in 2025.
“The Pro AV market presents a significant growth opportunity for Valens Semiconductor, driven by the latest additions to the portfolio, as well as our legacy products. Our chipset family offers industry-leading and standard-setting solutions to customers in the professional Audio-Video market, as well as in the industrial, machine vision and medical end markets. We believe these combined verticals represent a total addressable market of approximately $1 billion per annum.
“Additionally, we are confident that our innovative technology will position us to take advantage of the large opportunity within the automotive segment, which we estimate will have a total addressable market of $4.5 billion per annum by 2029.
“As we look to the second half of 2024 and beyond, Valens Semiconductor remains committed to capitalizing on the promising opportunities within our target markets. Our innovative, standard-setting, and high-speed connectivity solutions and highly sophisticated chipsets position us to achieve our goals and deliver value for our stakeholders,” said Ben-Zvi.
“Looking ahead, we are confident in our growth potential for the medium and long term. As the industry recovers, we are prepared to implement our growth strategy with an even more comprehensive portfolio of solutions, designed to penetrate new markets and sectors,” said Guy Nathanzon, CFO of Valens Semiconductor.
“Our third quarter revenues are expected to range between $14.7 million to $15.4 million, of which $1.2 million to $1.4 million is expected to be attributed to Acroname.”
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