| PROSPECTUS SUPPLEMENT | Filed pursuant to Rule |
| (To Prospectus dated April 14, 2021) | 424(b)(3) of the Rules and |
| | Regulations Under the |
| | Securities Act of 1933 |
| | Registration Statement No. 333-260390 |
| | |
VALENS SEMICONDUCTOR LTD.
Ordinary Shares
Warrants to Purchase Ordinary Shares
Recent Developments
This prospectus supplement, together with the prospectus (as subsequently amended), is to be used by the selling shareholders listed in the prospectus in connection with offers and sales from time to time of the ordinary shares and warrants to purchase ordinary shares of Valens Semiconductor Ltd.
Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “will,” “expect,” “anticipate,” “believe,” “seek,” “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding our anticipated future results, including financial results and contract wins, and future economic and market conditions. These statements are based on various assumptions, whether or not identified in this report, and on the current expectations of Valens Semiconductor's (“Valens”) management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Valens.
These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political and legal conditions; failure to realize the anticipated benefits of the business combination; future global, regional or local economic and market conditions; the development, effects and enforcement of laws and regulations; Valens' ability to manage future growth; Valens' ability to develop new products and solutions, bring them to market in a timely manner, and make enhancements to them; the effects of competition on Valens' future business; the outcome of any potential litigation, government and regulatory proceedings, investigations and inquiries; the effects of health epidemics, such as the recent global COVID-19 pandemic, have had and could in the future have on Valens' revenue, its employees and results of operations; the cyclicality of the semiconductor industry; Valens' ability to adjust its supply chain volume due to changing market conditions or failure to estimate its customers' demand, including during any downturn in the automotive or audio-video markets; disruptions in relationships with any one of Valens' key customers; difficulty selling products if customers do not design Valens products into their product offerings; Valens' dependence on winning selection processes and ability to generate timely or sufficient net sales or margins from those wins; political conditions in Israel; and those factors discussed in Valens' Registration Statement on Form F-1 and its other SEC filings under the heading “Risk Factors,” and other documents of Valens filed, or to be filed, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Valens does not presently know or that Valens currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Valens' expectations, plans or forecasts of future events and views as of the date of this report. Valens anticipates that subsequent events and developments may cause Valens' assessments to change. However, while Valens may elect to update these forward-looking statements at some point in the future, Valens specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Valens' assessment as of any date subsequent to the date of this report. Accordingly, undue reliance should not be placed upon the forward-looking statements.
September 13, 2022
Key Financial and Business Highlights
| · | Record quarterly revenues of $22.5 million, up 28.4% from Q2 2021 and up 4.0% from Q1 2022 |
| · | Q2 2022 GAAP gross margin was 70.2% compared to 71.2% in Q2 2021 (non-GAAP gross margin was 71.0% compared to 71.1% in Q2 2021) |
| · | Q2 2022 GAAP Net Loss was $(10.0) million, which included net financial expenses of $3.6 million, primarily from devaluation of Israeli-shekel related cash balance, compared to Net Loss of $(3.7) million in Q2 2021, and Adjusted EBITDA loss in the second quarter was $(4.5) million, compared to $(2.1) million in Q2 2021 |
| · | Strong balance sheet with working capital of $168.3 million, and $156.8 million in cash, cash equivalents and short-term deposits as of June 30, 2022 |
| – | Continue to make progress with the evaluation of the company’s MIPI A-PHY new VA7000 chipsets, as over 30 OEMs, Tier 1s and Tier 2s are evaluating this product for ADAS and surround view applications |
| – | Received substantial demand for VS3000, Valens Semiconductor’s newest audio-video product family, from Tier 1 customers across many geographies |
| – | Crestron Electronics announced full suite of more than 24 Professional Audio-Video (ProAV) products powered by the VS3000 for use by enterprises, in education and more. This adds to the multiple VS3000-based products already introduced by Crestron |
| – | Interest in the company’s technology in the medical space continues to grow. Introduced a connectivity solution with Würth Elektronik for medical imaging in unprecedented resolution that complies with the strict medical isolation specifications |
VALENS SEMICONDUCTOR LTD.
SUMMARY OF FINANCIAL RESULTS
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, |
| | 2022 | 2021 | 2022 | 2021 |
| Revenues | 22,481 | 17,510 | 44,101 | 30,874 |
| Gross Profit | 15,784 | 12,467 | 31,224 | 21,999 |
| Gross Margin | 70.2% | 71.2% | 70.8% | 71.3% |
| Net loss | (9,995) | (3,698) | (15,045) | (10,074) |
| Working Capital1 | 168,283 | 56,133 | 168,283 | 56,133 |
| Cash, cash equivalents and short-term deposits2 | 156,754 | 51,873 | 156,754 | 51,873 |
| Net cash used in operating activities | (4,251) | (6,443) | (12,654) | (9,651) |
| | | | | |
| Non-GAAP Financial Data | | | | |
| Non-GAAP Gross Margin3 | 71.0% | 71.1% | 71.5% | 71.4% |
| Adjusted EBITDA4 | (4,469) | (2,116) | (8,555) | (6,419) |
Non-GAAP Loss per share5 (in U.S. Dollars) | $(0.08) | $(0.16) | $(0.13) | $(0.57) |
1 Working Capital is calculated as Total Current Assets, less Total Current Liabilities, as of the last day of the period.
2 As of the last day of the period.
3 GAAP Gross Profit excluding share-based compensation and depreciation expenses, divided by revenue. For the three months ended June 30, 2022, and 2021, share-based compensation and depreciation expenses were $181 thousand and $(10) thousand respectively. For the six months ended June 30, 2022, and 2021, share-based compensation and depreciation expenses were $321 thousand and $47 thousand respectively.
4 Adjusted EBITDA is defined as Net profit (loss) before financial income (expense), net, income taxes, equity in earnings of investee and depreciation and amortization, further adjusted to exclude share-based compensation and change in fair value of Forfeiture Shares, which may vary from period-to-period. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other issuers, because not all issuers calculate Adjusted EBITDA in the same manner. Adjusted EBITDA should not be considered as an alternative to Net loss or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Please refer to the appendix at the end of this report for a reconciliation to the most directly comparable measure in accordance with GAAP.
5 See reconciliation of GAAP to non-GAAP financial measures.
VALENS SEMICONDUCTOR LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollars in thousands, except share and per share amounts)
(Unaudited)
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
| REVENUES | 22,481 | | 17,510 | | 44,101 | | 30,874 |
| COST OF REVENUES | (6,697) | | (5,043) | | (12,877) | | (8,875) |
| GROSS PROFIT | 15,784 | | 12,467 | | 31,224 | | 21,999 |
| OPERATING EXPENSES: | | | | | | | |
| Research and development expenses | (14,904) | | (10,956) | | (29,031) | | (21,354) |
| Sales and marketing expenses | (4,473) | | (3,222) | | (8,682) | | (6,332) |
General and administrative expenses | (4,340) | | (2,366) | | (8,641) | | (4,544) |
| TOTAL OPERATING EXPENSES | (23,717) | | (16,544) | | (46,354) | | (32,230) |
| OPERATING LOSS | (7,933) | | (4,077) | | (15,130) | | (10,231) |
| Change in fair value of Forfeiture Shares | 1,538 | | - | | 4,142 | | - |
| Financial income (expenses), net | (3,560) | | 503 | | (3,675) | | 336 |
| LOSS BEFORE INCOME TAXES | (9,955) | | (3,574) | | (14,663) | | (9,895) |
| INCOME TAXES | (43) | | (124) | | (389) | | (179) |
| LOSS AFTER INCOME TAXES | (9,998) | | (3,698) | | (15,052) | | (10,074) |
| Equity in earnings of investee | 3 | | - | | 7 | | - |
| NET LOSS | (9,995) | | (3,698) | | (15,045) | | (10,074) |
| EARNINGS PER SHARE DATA: | | | | | | | |
BASIC AND DILUTED NET LOSS PER ORDINARY SHARE6 (in U.S. Dollars) | $(0.10) | | $(0.68) | | $(0.15) | | $(1.61) |
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATION OF NET LOSS PER ORDINARY | 97,442,359 | | 11,020,299 | | 97,296,206 | | 10,927,357 |
6 See note 5.
VALENS SEMICONDUCTOR LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
(Unaudited)
| | | | |
ASSETS | | June 30, 2022 | | December 31, 2021 |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | | 46,577 | | | 56,791 |
| Short-term deposits | | | 110,177 | | | 117,568 |
| Trade accounts receivable | | | 10,047 | | | 7,095 |
| Inventories | | | 17,318 | | | 9,322 |
| Prepaid expenses and other current assets | | | 4,492 | | | 8,255 |
| TOTAL CURRENT ASSETS | | | 188,611 | | | 199,031 |
LONG-TERM ASSETS: | | | | | | |
| Property and equipment, net | | | 2,571 | | | 2,741 |
| Operating lease Right-Of-Use (ROU) assets7 | | | 4,408 | | | - |
| Other assets | | | 638 | | | 828 |
| TOTAL LONG-TERM ASSETS | | | 7,617 | | | 3,569 |
TOTAL ASSETS | | | 196,228 | | | 202,600 |
| | | | | | | |
| LIABILITIES AND EQUITY | | | | | | |
CURRENT LIABILITIES8 | | | 20,328 | | | 15,699 |
LONG-TERM LIABILITIES: | | | | | | |
| Forfeiture shares | | | 516 | | | 4,658 |
| Non-current operating leases liabilities9 | | | 2,126 | | | - |
| Other long-term liabilities | | | 48 | | | 46 |
| TOTAL LONG-TERM LIABILITIES | | | 2,690 | | | 4,704 |
| TOTAL LIABILITIES | | | 23,018 | | | 20,403 |
| | | | | | | |
| SHAREHOLDERS’ EQUITY | | | 173,210 | | | 182,197 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | 196,228 | | | 202,600 |
| | | | | | | |
7 As of January 1, 2022, the company has implemented the FASB ASU No. 2016-02, Leases (ASC 842), on the recognition, measurement, presentation, and disclosure of leases.
8 As of June 30, 2022, includes $1,814 thousand of current maturities of operating leases liabilities (none as of December 31, 2021); see footnote 7.
9 See footnote 7.
VALENS SEMICONDUCTOR LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars in thousands)
(Unaudited)
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| CASH FLOW FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss for the period | | (9,995) | | (3,698) | | (15,045) | | (10,074) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Income and expense items not involving cash flows: | | | | | | | | |
| Depreciation | | 347 | | 266 | | 667 | | 522 |
| Stock-based compensation | | 3,117 | | 1,695 | | 5,908 | | 3,290 |
| Exchange rate differences | | 4,501 | | (545) | | 4,972 | | (231) |
| Interest from short-term deposits | | (132) | | 37 | | (295) | | 219 |
| Change in fair value of forfeiture shares | | (1,538) | | - | | (4,142) | | - |
| Reduction in the carrying amount of ROU assets | | 424 | | - | | 844 | | - |
| Changes in operating assets and liabilities: | | | | | | | | |
| Trade accounts receivable | | 166 | | (2,475) | | (2,952) | | 767 |
| Prepaid expenses and other current assets | | 3,245 | | (458) | | 3,763 | | (1,588) |
| Inventories | | (4,852) | | (1,752) | | (7,996) | | (2,541) |
| Other assets | | 86 | | (26) | | 190 | | (31) |
| Current Liabilities | | 1,189 | | 513 | | 2,742 | | 23 |
| Change in operating lease liabilities | | (811) | | - | | (1,312) | | - |
| Other long-term liabilities | | 2 | | - | | 2 | | (7) |
| Net cash used in operating activities | | (4,251) | | (6,443) | | (12,654) | | (9,651) |
| | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Investment in short-term deposits | | (13,088) | | (4,520) | | (31,340) | | (4,520) |
| Maturities of short-term deposits | | 21,900 | | 12,500 | | 37,400 | | 29,500 |
| Purchase of property and equipment | | (244) | | (127) | | (424) | | (505) |
| Net cash provided by investing activities | | 8,568 | | 7,853 | | 5,636 | | 24,475 |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Deferred issuance costs | | - | | (218) | | - | | (218) |
| Exercise of options | | 96 | | 589 | | 150 | | 665 |
| Net cash provided by financing activities | | 96 | | 371 | | 150 | | 447 |
| | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | (2,830) | | 531 | | (3,346) | | 217 |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 1,583 | | 2,312 | | (10,214) | | 15,488 |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | | 44,994 | | 39,492 | | 56,791 | | 26,316 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | | 46,577 | | 41,804 | | 46,577 | | 41,804 |
| | | | | | | | | |
| SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | |
| Cash paid for taxes | | 65 | | 147 | | 121 | | 224 |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | |
| Trade accounts payable on account of property and equipment | | - | | - | | 73 | | - |
| Unpaid issuance costs | | - | | 2,722 | | - | | 2,722 |
| Operating lease liabilities arising from obtaining operating right-of-use assets | | 104 | | - | | 350 | | - |
VALENS SEMICONDUCTOR LTD.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(U.S. Dollars in thousands)
(Unaudited)
The following table provides a reconciliation of Net loss to Adjusted EBITDA, a non-GAAP measure. Adjusted EBITDA is defined as Net profit (loss) before financial income (expense), net, income taxes, equity in earnings of investee and depreciation and amortization, further adjusted to exclude share-based compensation and change in fair value of Forfeiture Shares, which may vary from period-to-period. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other issuers, because not all issuers calculate Adjusted EBITDA in the same manner. Adjusted EBITDA should not be considered as an alternative to Net loss or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
| Net loss | (9,995) | | (3,698) | | (15,045) | | (10,074) |
| Adjusted to exclude the following: | | | | | | | |
| | Change in fair value of Forfeiture Shares | (1,538) | | - | | (4,142) | | - |
| | Financial expense (income), net | 3,560 | | (503) | | 3,675 | | (336) |
| | Income taxes | 43 | | 124 | | 389 | | 179 |
| | Equity in earnings of investee | (3) | | - | | (7) | | - |
| | Depreciation | 347 | | 266 | | 667 | | 522 |
| | Stock-based compensation expenses | 3,117 | | 1,695 | | 5,908 | | 3,290 |
| Adjusted EBITDA | (4,469) | | (2,116) | | (8,555) | | (6,419) |
VALENS SEMICONDUCTOR LTD.
RECONCILIATION OF GAAP TO NON-GAAP Tables
(U.S. Dollars in thousands)
(Unaudited)
The following tables provide a calculation of the GAAP Loss per share and reconciliation to Non-GAAP Loss per share.
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| GAAP Loss per Share | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
| GAAP Net Loss | (9,995) | | (3,698) | | (15,045) | | (10,074) |
| Adjusted to include the following: | | | | | | | |
| Accrued dividend related to Preferred Shares | - | | (3,788) | | - | | (7,478) |
| Total Loss used for computing Loss per Share | (9,995) | | (7,486) | | (15,045) | | (17,552) |
Earnings Per Share Data: | | | | | | | |
| GAAP Loss per Share (in U.S. Dollars) | $(0.10) | | $(0.68) | | $(0.15) | | $(1.61) |
Weighted average number of shares used in
calculation of net loss per share | 97,442,359 | | 11,020,299 | | 97,296,206 | | 10,927,357 |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Non-GAAP Loss per Share10 | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | |
| GAAP Net loss | (9,995) | | (3,698) | | (15,045) | | (10,074) |
| Adjusted to exclude the following: | | | | | | | |
Stock based compensation | 3,117 | | 1,695 | | 5,908 | | 3,290 |
| Depreciation | 347 | | 266 | | 667 | | 522 |
| Change in fair value of Forfeiture Shares | (1,538) | | - | | (4,142) | | - |
| Total Loss used for computing Loss per Share | (8,069) | | (1,737) | | (12,612) | | (6,262) |
Earnings Per Share Data: | | | | | | | |
| Non-GAAP Loss per Share (in U.S. Dollars) | $(0.08) | | $(0.16) | | $(0.13) | | $(0.57) |
Weighted average number of shares used in
calculation of net loss per share | 97,442,359 | | 11,020,299 | | 97,296,206 | | 10,927,357 |
10 The company calculates its non-GAAP Loss per Share as GAAP Net Loss adjusted to exclude the following: Stock based compensation, depreciation, and the change in fair value of Forfeiture Share (the change in fair value of Forfeiture Shares totaled at $1,538 thousand and $2,604 thousand for the second and first quarters of 2022, respectively) divided by the weighted average number of shares used in calculation of net loss per share.
