The Israeli chip company Valens, which develops chips for the automotive and audio-video industries, joined last week the technology companies that are making layoffs. The company reported on a plan to improve operational efficiency, in which 15% of the employees are fired, a move that should result in annual savings of 9 million dollars and is expected to be completed by the end of the third quarter.
At the end of 2022, Valens employed 313 employees (most of them at the company’s headquarters in Hod Hasharon), so it is about the dismissal of nearly 50 employees. It should be noted that during 2022 Valens’ workforce will increase by 50 employees.
The layoffs come against the background of reduced forecasts and an expectation for a particularly weak third quarter. While the forecast for the second (current) quarter remains unchanged, and the company continues to expect revenues of $23.9-24.1 million and EBITDA (earnings excluding interest, tax, depreciation and amortization) of negative $3.7-4.3 million, in the third quarter Valens expects revenues to reach the bottom of 14-14.2 million dollars, and will improve in the fourth quarter. The company confirms the expectation that it will break even in adjusted EBITDA towards the end of 2023.
The annual forecast, which was for revenues of 97-100 million dollars, was reduced to 83.8-84.2 million dollars, with the automotive sector contributing approximately 30% of revenues in 2023. This means that instead of the company’s revenues growing this year by 7%-10%, they will shrink by 7.2%-7.6% compared to 2022. The annual EBITDA will be negative at 16.5-18.3 million dollars, compared to the original forecast for a negative EBITDA of 13.6 -$15.4 million and compared to a negative EBITDA of $14.9 million recorded in 2022.
Gideon Ben-Zvi, CEO of Valens, stated that the plan will enable a more efficient utilization of development and other operational resources, and will help the company to progress towards achieving profitability goals, in days of continued uncertainty in the macroeconomic environment. “We have witnessed in recent weeks a slowdown in the pace of orders from customers and additional requests from customers to postpone shipments, which indicates a slow consumption of their stocks compared to our early expectations,” Ben-Zvi said, but added that “despite the change in the short term, the growth opportunities of Valence Semiconductor in the longer term continue to be promising.”
Valence became a public company on Nasdaq when it was merged into a SPAC in 2021 at a value of 1.1 billion dollars. Like most companies that were merged at that time, Valence lost a large part of its value and today it is traded at a value of 241 million dollars (a decrease of about 80%).