NASDAQ:SILC Silicom Q4 2024 Earnings Report $14.19 +0.02 (+0.14%) As of 10:27 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Silicom EPS ResultsActual EPS-$0.76Consensus EPS -$0.32Beat/MissMissed by -$0.44One Year Ago EPSN/ASilicom Revenue ResultsActual RevenueN/AExpected Revenue$14.63 millionBeat/MissN/AYoY Revenue GrowthN/ASilicom Announcement DetailsQuarterQ4 2024Date1/30/2025TimeBefore Market OpensConference Call DateThursday, January 30, 2025Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (20-F)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Silicom Q4 2024 Earnings Call TranscriptProvided by QuartrJanuary 30, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Silicom 4th Quarter 2024 Results Conference Call. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. Operator00:00:19You should have all received by now the company's press release. If you have not received it, please contact Silicom's Investor Relations team at EK Global Investor Relations at 1212-378-8040 or view it in the News section of the company's website, www.silicom usa.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Operator00:00:46Green, would you like to begin, please? Kenny GreenInvestor Relation at EK Global Investor Relations00:00:49Thank you, operator. I would like to welcome all of you to Silicom's quarterly results conference call. Before we start, I would like to draw your attention to the following Safe Harbor statement. This conference call contains forward looking statements. Such statements may include, but are not limited to, anticipated future financial and operating results and Silicom's outlook and prospects. Kenny GreenInvestor Relation at EK Global Investor Relations00:01:11Those statements are based on management's current beliefs, expectations and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic and other conditions and are subject to known and unknown risks and uncertainties and other factors, many of which are outside of Silicom's control, which might cause actual results to differ materially from expectations expressed or implied in the forward looking statements. These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on a limited number of customers, the speed and extent to which Silicom solutions are adopted by the relevant markets, difficulties in the commercialization and marketing of Silicom's products and services maintaining and protecting brand recognition protection of the intellectual property competition disruptions to manufacturing and sales and marketing development and customer support activities the impact of war in Israel and in the Ukraine, rising inflation, changing interest rates, volatile exchange rates as well as any and continuing or new effects resulting from the COVID-nineteen pandemic and global economic uncertainty, which may impact customer demand through customers exercising greater caution and selectivity with their short term IT investment plan. The factors noted are not exhaustive. Further information about the company's businesses, including information about factors that materially affect Silicom's results of operations and financial condition, are discussed in Silicom's annual report on Form 20 F and other documents filed by the company and that may be subsequently filed by the company from time to time with the Securities and Exchange Commission. Kenny GreenInvestor Relation at EK Global Investor Relations00:02:50Therefore, there can be no assurance that actual future results will not differ materially from anticipated results. Consequently, investors are reminded not to rely on these forward looking statements. Silicom does not undertake to update any forward looking statement as a result of new information or future events or developments, except as may be required by law. In addition, following the company's disclosure of certain non GAAP financial measures in today's earnings release, such non GAAP financial measures will be discussed during this call. Such non GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Kenny GreenInvestor Relation at EK Global Investor Relations00:03:27Management believes that the presentation of these non GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing cooperations and prospects for the future. Unless otherwise stated, it should be assumed that financials discussed in this conference call will be on a non GAAP basis. Non GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing the company's financial condition and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non GAAP to GAAP financial measures are included in today's earnings release, which you can find on Silicom's website. Kenny GreenInvestor Relation at EK Global Investor Relations00:04:09With us on the line today are Mr. Liron Eisenman, President and CEO and Mr. Eran Gillard, CFO. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financials. We will then turn the call over to the question and answer session. Kenny GreenInvestor Relation at EK Global Investor Relations00:04:26And with that, I would now like to turn the call over to Liron. Liron, please go ahead. Liron EizenmanPresident & CEO at Silicom00:04:32Thank you, Kenny. Welcome, everyone, to our conference call to discuss the results of the Q4 and full year 2024. We are pleased with our achievement this quarter, delivering financial results in line with the expectations and even more importantly, we made continuous progress in line with our strategic plan aimed at bringing renewed revenue growth, profitability and ultimately increased shareholder value. Strategically, I'm happy to say that we are on track and during the past quarter we saw strong design win momentum, increasing the visibility of our potential mid to long term revenue mid to long term revenue growth. Those achievements highlights the effectiveness of our strategy and position us well with the potential revenues from recent wins expected to ramp up from 2026. Liron EizenmanPresident & CEO at Silicom00:05:17Our renewed focus on our core product lines, coupled with our strong relationship with our customers and potential new customers created a significant pipeline, which we hope to convert to even more design wins in 2025. While we continue to overcome short term challenges, during the quarter, we achieved milestone after milestone with a variety of customers and projects and we advanced exciting opportunities through our broad pipeline towards future design wins. All this is a clear indication that we are on track for a return to strong double digit growth in 2020 6 and beyond. In terms of our financial performance for the Q4, our revenue came in at the center of our expected range at $14,500,000 During 2024, we generated 17 point $3,000,000 in cash with $10,000,000 well over half of our cash generation used to repurchase our own shares as part of our ongoing buyback plan. This is aligned with our long term strategy of shareholder value creation. Liron EizenmanPresident & CEO at Silicom00:06:20Our ability to pursue this strategy is due to our strong balance sheet built up over our many years of success and cash generation. This ensures we can maintain adequate investment in our business and its growth engines without compromise and at the same time take advantage of opportunities to increase shareholder value. Just to highlight the balance sheet strength, at the end of the Q4, our working capital and marketable securities amounted to $121,000,000 including $79,000,000 in cash deposits and highly rated bonds with no debt. All this amounts to $21 per share. We remain on track with our long term strategic plan, which is targeting an EPS above $3 at the revenue level of between $150,000,000 $160,000,000 I want to highlight 2 recent design wins and highlight the progress that we have made in recent months. Liron EizenmanPresident & CEO at Silicom00:07:14We recently announced a new design win with a major U. S.-based cybersecurity company, an existing customer of ours. We received initial orders and expect first revenues in the second half of twenty twenty five, with revenues starting to ramp up in 20 26 to achieve a full annual run rate of around $2,000,000 This design win is for the next generation of this customer's leading product line. Our ability to efficiently customize this product for our customer, providing both an edge system and our network interface card were key factors in securing the win. Our capability to deliver both products is highly synergetic from the customer's point of view and provides us with a significant competitive advantage. Liron EizenmanPresident & CEO at Silicom00:07:55We believe this trend will gain traction with additional customers and we have several other accounts in the pipeline looking at a similar approach. This win expands the relationship that we have been building with this customer for several years. Furthermore, we continue to discuss the potential for including additional product for the customer's other product line. We also announced a design win with a global networking and a security as a service leader, a new customer standardizing on silicon for all its edge deployment scenarios. This makes us their sole edge networking hardware provider paving the way for additional multimillion dollar design wins. Liron EizenmanPresident & CEO at Silicom00:08:31This first design win with this customer encompasses several products, including several of our newest edge networking solutions pre integrated with Silicom's network interface cards. Initial deliveries should begin in the second half of twenty twenty five, which revenues from this design win starting to ramp up to over $3,000,000 annually from 2026. This was the result of a process which began a year ago when we initiated a discussion covering a specific product. Over time, the discussion expanded to more products and additional use cases leading to this design win as well as the potential for others. The fact that we can address all the edge networking needs of this customer confirms the value of our broad product portfolio and the strength of our offering. Liron EizenmanPresident & CEO at Silicom00:09:14Those wins underscore the traction of our renewed sales growth strategy, building a robust pipeline and strong base of recurring revenues for long term growth. The relationships are based on deep trust built over a long period of time and show slow but solid growth, supporting the success of our strategic plans. I want to provide some more color on our pipeline. Today, the pipeline of opportunities at the input of our design win funnel is broader than it has been for very long time, encompassing edge systems, smart NICs and FPGAs. Our target is to achieve between 7 9 additional new design wins in 2025. Liron EizenmanPresident & CEO at Silicom00:09:53I want to note that the sales cycle for our product is inherently long. In our experience, it takes between 9 12 months to achieve a design win from initial contact and then further 3 to 9 months working closely with the customer to initial revenues with up to 12 months for a meaningful ramp up. It therefore takes significant time from the first achieving a design win to when Silicom experienced significant recurring revenues. However, when we do reach a steady state of recurring revenues, those tend to provide a long tail over the lifetime of the customer's product, which can be many years. I want to highlight our new investor presentation, which you can find on the website, which includes examples of some of the many opportunities in our pipeline. Liron EizenmanPresident & CEO at Silicom00:10:36It also shows examples of the opportunities, which made it through the funnel and have become design wins and a source of revenue growth. We are seeing the positive impact of our focus on small to medium design wins, expanding the pool of future opportunities in addition to the deals with the potential for double digit 1,000,000 of dollars in annual revenue. We believe that during the coming years, we will see a lot of additional new opportunities at the input of the funnel, and we expect that more and more of those opportunities will convert into design wins. Furthermore, the potential growth is supported by increasingly diverse pipeline of design wins, including both new and existing customers. This pipeline includes leading names in the networking service providers and cybersecurity industries. Liron EizenmanPresident & CEO at Silicom00:11:20While we increased the number of those strategic engagements, we believe they will lead to more sustainable revenue growth by reducing our reliance on a few large strategic accounts. While our recent design wins will have minor positive impact on our accounts. While our recent design wins will have minor positive impact on our financial results Liron EizenmanPresident & CEO at Silicom00:11:38in 2025, we believe those and others that we expect to sign Liron EizenmanPresident & CEO at Silicom00:11:38in the coming months will serve as the foundation for much more meaningful growth in 2026. I note that if the opportunities in the pipeline ramp up faster than expected, we could achieve the goals of our strategic plan sooner than currently projected. In terms of our guidance for the Q1 of 2025, revenues are expected to remain stable at levels similar to those of the past few quarters between $14,000,000 $15,000,000 Looking further out, growth in 2025 is expected to be in the low single digits with strong double digit annual growth rate materializing gradually from 2026. In summary, we are pleased with our progress. We are very optimistic about our ability to continue and execute on our growth plan and fully focused on meeting our goal of creating value for our customers and for our shareholders. Liron EizenmanPresident & CEO at Silicom00:12:27We are advancing towards our mid- and long term goals with a robust pipeline that position us well for double digit growth from 2026 onwards. As I have mentioned, we aim to achieve 7 to 9 design wins in 2025, which will serve us as a key indicator of our progress. Looking further out, we continue to focus on creating strong long term value for our shareholders aiming at an EPS of above $3 when we reach annual revenues in the range of $150,000,000 to $160,000,000 A fast ramp up of a few of the potential deals we have within the pipeline may help us achieve this goal faster. We have a strong design win roster full of Tier 1 customers coupled with superb products and a robust pipeline of opportunities. We have a strong financial foundation with a solid balance sheet. Liron EizenmanPresident & CEO at Silicom00:13:15We continue to generate positive cash flow and we have an active share repurchase program that underscores our commitment to enhancing shareholder value. This new the new opportunities and design wins momentum that has grown throughout 2024 has increased the already high motivation and dedication of our excellent team who entered 2025 with excitement regarding Silicom's prospects. We look forward to reporting on our progress as we continue executing on our growth strategy. With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead. Eran GiladCFO & Company Secretary at Silicom00:13:49Thank you, Liron, and good day to everyone. Revenues for the Q4 of 2020 24 were $14,500,000 a decline from revenues of $18,800,000 as reported in the Q4 of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 76% Europe and Israel, 16% Far East and Rest of the World, 8%. During the last 12 months, our top our 2 10% plus customers together accounted for about 26% of our revenues. I will be presenting the rest of the financial results on a non GAAP basis, which excludes the non cash compensation expenses in respect of options and RSUs granted to directors, officers and employees impairment of goodwill, taxes on amortization and impairment of acquired intangible assets, impairment of intangible assets and related write offs as well as lease liabilities, financial expenses. Eran GiladCFO & Company Secretary at Silicom00:15:09For the full reconciliation from GAAP to non GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the Q4 of 2024 was $4,200,000 representing a gross margin of 29.1% and compared to a gross profit of $5,300,000 or gross margin of 28% in the Q4 of 2023. As discussed previously, in the near term, our gross margin is expected to be towards the lower end of our expected 27% to 32% range. And as our revenues grow from current levels over the longer term, it is expected to increase towards the upper end. Operating expenses in the Q4 of 2024 were $6,900,000 compared with $6,800,000 reported in the Q4 of 2023. Eran GiladCFO & Company Secretary at Silicom00:16:24Operating loss for for the Q4 of 2024 was $2,700,000 compared to operating loss of $1,500,000 as reported in the Q4 of 2023. Net loss for the quarter was $3,400,000 compared to a net loss of $500,000 in the Q4 of 2020 3. Loss per share in the quarter was $0.58 This is compared with net loss per share of 0 point 0 $7 as reported in the Q4 of last year. Now turning to the balance sheet. As of December 31, 2024, our working capital and marketable securities amounted to 100 and $121,000,000 including $41,000,000 in high quality inventory, accounts receivable net of accounts payable of $3,000,000 and $79,000,000 in cash, cash equivalents and highly rated marketable securities with no debt. Eran GiladCFO & Company Secretary at Silicom00:17:41During 2024, we used $10,000,000 for the repurchase of about 650,000 shares. That ends my summary. I would like to hand back over to the operator for questions and answers session. Operator? Operator00:18:04Thank you. Ladies and gentlemen, at this time, we will begin the question and answer The first question is from Ryan Coons of Needham and Company. Please go ahead. Jeffrey HopsonEquity Research Associate at Needham & Company00:18:37Hi, this is Jeff Hopson on for Ryan Kuntz at Needham. Thank you for the questions and thank you for the very comprehensive presentation today. It was very helpful to visualize all the opportunities and design wins at Silicom. Maybe if we could just go into some of those design wins. As you laid out the timeline, it does take a long time from design to revenue. Jeffrey HopsonEquity Research Associate at Needham & Company00:19:10What is then the typical contract length or yearly engagements for each of these design wins on average? Liron EizenmanPresident & CEO at Silicom00:19:21We estimate usually it spans around 4 to 5 years. So it's quite a lot of work to get started and win. But once we are there, usually a customer would go for us for 4 5 years and then discussions would start on the next generation, but that's very typical for us. Jeffrey HopsonEquity Research Associate at Needham & Company00:19:42And then for these new products or new designs, are there any architectural design changes? Or what's kind of the underlying competitive advantage that Silicon has for these new opportunities? Liron EizenmanPresident & CEO at Silicom00:19:58I mean, first of all, we are really at the I would say, at the edge of the newest technology working with the best silicon vendors out there and working very, very closely with them to make sure we are usually the first to be out with a product as long as the silicon launches. We are also launching our product. But I mean, that's not the only thing. We're also providing a full solution for our customers in the sense that we also understand software very well and we can give them all the supply chain capabilities they need around the product to be successful. But always being first and we invest quite heavily in R and D that puts us in a very strong position to be a great, let's say, also consultant to our customers about what to do. Liron EizenmanPresident & CEO at Silicom00:20:47Many times they come to us and ask us, oh, we have that kind of problem, how can you help us solve that? And we're able to give them. And one thing that really distinguish us from others is our very rich product line that we can actually also integrate our network interface cards, SmartNICs, FPGA cards or acceleration cards into our own systems and basically become a one stop shop for our customers to get everything they need on hardware from 1 company. Jeffrey HopsonEquity Research Associate at Needham & Company00:21:20Thank you. And for then the investment in R and D, are there any initial thoughts, I know for sales for 2025, you're thinking low single digit. Is there any initial estimates they Liron EizenmanPresident & CEO at Silicom00:21:46to expand dramatically, if at all, it will be something very specific that we need here or there, but nothing dramatic. Jeffrey HopsonEquity Research Associate at Needham & Company00:21:58Thank you. I'll re queue and let more questions. Operator00:22:22There are further questions from Ryan Coons of Needham and Company. Please go ahead. Jeffrey HopsonEquity Research Associate at Needham & Company00:22:31Hi, Jeff Hopson again. Just maybe 2 more from me. I know you guys had the long term target for gross margins of 28% to 32%. Is there any variability in the gross margin expectations for the 3 segments of opportunities that you laid out in the presentation? Liron EizenmanPresident & CEO at Silicom00:22:55I Liron EizenmanPresident & CEO at Silicom00:22:55mean, it's changing from product to product, from use case to use case. Still, we think the average that we'll see eventually after all taking all the different opportunities into play would be in the range that you mentioned 27 to 32. Some products obviously have more, some products have some less, but that's what we expect overall to stay in that range. Jeffrey HopsonEquity Research Associate at Needham & Company00:23:24Perfect. Thank you. And maybe just one more. You did have AI data infrastructure as one of the opportunities in SmartNIC. I guess overall for AI, is the technology at the edge yet or is that something that's too out in the future for being a real driver? Liron EizenmanPresident & CEO at Silicom00:23:47We think that for the edge, it's still, I would say, POC level at the moment. It's not full production right now. But definitely, it's something that comes up with customers from time to time. And we see still, we see on the other side, let's say, on the training side, on the big data center side, some of our customers are providing products to that to those goals, those use cases. So we enjoy through them. Liron EizenmanPresident & CEO at Silicom00:24:16And some other opportunities are actually maybe us doing something more direct with those kind of customers. We are pursuing both opportunities. Jeffrey HopsonEquity Research Associate at Needham & Company00:24:28Perfect. Thank you very much for the questions. Operator00:24:34The next question is from Jeff Meyers of Cobia Capital. Please go ahead. Jeffrey MeyersFounder & CIO at Cobia Capital Management00:24:43Hi, good morning. Maybe you could talk a little bit about the FPGA opportunity, where you've been with those products, what you see going forward and maybe also talk a little bit about gross margins on that front? Liron EizenmanPresident & CEO at Silicom00:25:00Absolutely. So with FPGA, we see several opportunities. We've been always pretty active in the high frequency trading. We continue to be there, but we also see the opportunities growing much more than that. We see actually opportunities together with many of the IP partners that we are partnering with. Liron EizenmanPresident & CEO at Silicom00:25:21We see opportunities in streaming. We see opportunities from security. We see opportunities in network equipment companies. So we see quite a lot of opportunities either we provide the IP through one of our partners and we're actually building quite an impressive network of IP partners working with us or actually the customer is taking upon themselves to do the actual IP development. So we have a few very nice opportunities, I would say, at the top of the pipeline right now. Liron EizenmanPresident & CEO at Silicom00:25:53We hope that they will materialize. And definitely from a gross margin perspective, usually those products are somewhat better. And we hope that indeed we can maintain a higher GP on those products. And but at the end of the day, I think with looking at all the opportunities we have, I don't think that the range of our overall GP would change, but definitely for those opportunities we will probably see higher GP than the average. Jeffrey MeyersFounder & CIO at Cobia Capital Management00:26:24Got it. Thanks, guys. Kenny GreenInvestor Relation at EK Global Investor Relations00:26:28Thanks, Jeff. Kenny GreenInvestor Relation at EK Global Investor Relations00:26:32Operator? Operator00:26:34There are no further questions at this time. Before I ask Mr. Eisenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www dotsilicom usa.com. Mr. Operator00:26:51Aizanon, would you like to make your concluding statement? Liron EizenmanPresident & CEO at Silicom00:26:55Thank you, operator. Thank you, everybody, for joining the call and for your interest in Silicom. We look forward Liron EizenmanPresident & CEO at Silicom00:27:00to hosting you on our next call in 3 months. Good day. Operator00:27:05Thank you. This concludes Silicom's Q4 2024 results conference call. Thank you for your participation. Operator00:27:12You may go ahead and disconnect.Read moreParticipantsExecutivesLiron EizenmanPresident & CEOEran GiladCFO & Company SecretaryAnalystsKenny GreenInvestor Relation at EK Global Investor RelationsJeffrey HopsonEquity Research Associate at Needham & CompanyJeffrey MeyersFounder & CIO at Cobia Capital ManagementPowered by Conference Call Audio Live Call not available Earnings Conference CallSilicom Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Annual report(20-F) Silicom Earnings HeadlinesSilicom (NASDAQ:SILC) Receives "Hold" Rating from Needham & Company LLCMay 1 at 2:42 AM | americanbankingnews.comSilicom Ltd. (NASDAQ:SILC) Q1 2025 Earnings Call TranscriptApril 29 at 1:00 PM | msn.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 1, 2025 | Golden Portfolio (Ad)Silicom Ltd.: Silicom Reports Q1 2025 ResultsApril 29 at 1:35 AM | finanznachrichten.deSilicom Ltd. (SILC) Q1 2025 Earnings Call TranscriptApril 28 at 3:09 PM | seekingalpha.comSilicom Reports Q1 2025 ResultsApril 28 at 8:15 AM | prnewswire.comSee More Silicom Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Silicom? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Silicom and other key companies, straight to your email. Email Address About SilicomSilicom (NASDAQ:SILC), together with its subsidiaries, designs, manufactures, markets, and supports networking and data infrastructure solutions for servers, server-based systems, and communications devices. It offers server network interface cards; and smart cards, such as smart server adapters, which include redirector and switching cards, encryption and data compression hardware acceleration cards, forward error correction acceleration and offloading cards, time synchronization cards, and field programmable gate array-based cards. The company also provides virtualized and universal customer-premises equipment; and edge devices for SD-WAN, secure access service edge, Telco dedicated routers, and NFV deployments. It serves original equipment manufacturing, cloud, telco, mobile, and related service provider markets. The company operates in the United States, North America, Israel, Europe, and the Asia Pacific. Silicom Ltd. was incorporated in 1987 and is headquartered in Kfar Saba, Israel.View Silicom ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of EarningsAmazon's Earnings Will Make or Break the Stock's Comeback CrowdStrike Stock Nears Record High, Dip Ahead of Earnings?Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings? Upcoming Earnings Apollo Global Management (5/2/2025)The Cigna Group (5/2/2025)Chevron (5/2/2025)Eaton (5/2/2025)NatWest Group (5/2/2025)Shell (5/2/2025)Exxon Mobil (5/2/2025)Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)CRH (5/5/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
PresentationSkip to Participants Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Silicom 4th Quarter 2024 Results Conference Call. All participants are present in listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. Operator00:00:19You should have all received by now the company's press release. If you have not received it, please contact Silicom's Investor Relations team at EK Global Investor Relations at 1212-378-8040 or view it in the News section of the company's website, www.silicom usa.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Operator00:00:46Green, would you like to begin, please? Kenny GreenInvestor Relation at EK Global Investor Relations00:00:49Thank you, operator. I would like to welcome all of you to Silicom's quarterly results conference call. Before we start, I would like to draw your attention to the following Safe Harbor statement. This conference call contains forward looking statements. Such statements may include, but are not limited to, anticipated future financial and operating results and Silicom's outlook and prospects. Kenny GreenInvestor Relation at EK Global Investor Relations00:01:11Those statements are based on management's current beliefs, expectations and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic and other conditions and are subject to known and unknown risks and uncertainties and other factors, many of which are outside of Silicom's control, which might cause actual results to differ materially from expectations expressed or implied in the forward looking statements. These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on a limited number of customers, the speed and extent to which Silicom solutions are adopted by the relevant markets, difficulties in the commercialization and marketing of Silicom's products and services maintaining and protecting brand recognition protection of the intellectual property competition disruptions to manufacturing and sales and marketing development and customer support activities the impact of war in Israel and in the Ukraine, rising inflation, changing interest rates, volatile exchange rates as well as any and continuing or new effects resulting from the COVID-nineteen pandemic and global economic uncertainty, which may impact customer demand through customers exercising greater caution and selectivity with their short term IT investment plan. The factors noted are not exhaustive. Further information about the company's businesses, including information about factors that materially affect Silicom's results of operations and financial condition, are discussed in Silicom's annual report on Form 20 F and other documents filed by the company and that may be subsequently filed by the company from time to time with the Securities and Exchange Commission. Kenny GreenInvestor Relation at EK Global Investor Relations00:02:50Therefore, there can be no assurance that actual future results will not differ materially from anticipated results. Consequently, investors are reminded not to rely on these forward looking statements. Silicom does not undertake to update any forward looking statement as a result of new information or future events or developments, except as may be required by law. In addition, following the company's disclosure of certain non GAAP financial measures in today's earnings release, such non GAAP financial measures will be discussed during this call. Such non GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Kenny GreenInvestor Relation at EK Global Investor Relations00:03:27Management believes that the presentation of these non GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing cooperations and prospects for the future. Unless otherwise stated, it should be assumed that financials discussed in this conference call will be on a non GAAP basis. Non GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing the company's financial condition and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non GAAP to GAAP financial measures are included in today's earnings release, which you can find on Silicom's website. Kenny GreenInvestor Relation at EK Global Investor Relations00:04:09With us on the line today are Mr. Liron Eisenman, President and CEO and Mr. Eran Gillard, CFO. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financials. We will then turn the call over to the question and answer session. Kenny GreenInvestor Relation at EK Global Investor Relations00:04:26And with that, I would now like to turn the call over to Liron. Liron, please go ahead. Liron EizenmanPresident & CEO at Silicom00:04:32Thank you, Kenny. Welcome, everyone, to our conference call to discuss the results of the Q4 and full year 2024. We are pleased with our achievement this quarter, delivering financial results in line with the expectations and even more importantly, we made continuous progress in line with our strategic plan aimed at bringing renewed revenue growth, profitability and ultimately increased shareholder value. Strategically, I'm happy to say that we are on track and during the past quarter we saw strong design win momentum, increasing the visibility of our potential mid to long term revenue mid to long term revenue growth. Those achievements highlights the effectiveness of our strategy and position us well with the potential revenues from recent wins expected to ramp up from 2026. Liron EizenmanPresident & CEO at Silicom00:05:17Our renewed focus on our core product lines, coupled with our strong relationship with our customers and potential new customers created a significant pipeline, which we hope to convert to even more design wins in 2025. While we continue to overcome short term challenges, during the quarter, we achieved milestone after milestone with a variety of customers and projects and we advanced exciting opportunities through our broad pipeline towards future design wins. All this is a clear indication that we are on track for a return to strong double digit growth in 2020 6 and beyond. In terms of our financial performance for the Q4, our revenue came in at the center of our expected range at $14,500,000 During 2024, we generated 17 point $3,000,000 in cash with $10,000,000 well over half of our cash generation used to repurchase our own shares as part of our ongoing buyback plan. This is aligned with our long term strategy of shareholder value creation. Liron EizenmanPresident & CEO at Silicom00:06:20Our ability to pursue this strategy is due to our strong balance sheet built up over our many years of success and cash generation. This ensures we can maintain adequate investment in our business and its growth engines without compromise and at the same time take advantage of opportunities to increase shareholder value. Just to highlight the balance sheet strength, at the end of the Q4, our working capital and marketable securities amounted to $121,000,000 including $79,000,000 in cash deposits and highly rated bonds with no debt. All this amounts to $21 per share. We remain on track with our long term strategic plan, which is targeting an EPS above $3 at the revenue level of between $150,000,000 $160,000,000 I want to highlight 2 recent design wins and highlight the progress that we have made in recent months. Liron EizenmanPresident & CEO at Silicom00:07:14We recently announced a new design win with a major U. S.-based cybersecurity company, an existing customer of ours. We received initial orders and expect first revenues in the second half of twenty twenty five, with revenues starting to ramp up in 20 26 to achieve a full annual run rate of around $2,000,000 This design win is for the next generation of this customer's leading product line. Our ability to efficiently customize this product for our customer, providing both an edge system and our network interface card were key factors in securing the win. Our capability to deliver both products is highly synergetic from the customer's point of view and provides us with a significant competitive advantage. Liron EizenmanPresident & CEO at Silicom00:07:55We believe this trend will gain traction with additional customers and we have several other accounts in the pipeline looking at a similar approach. This win expands the relationship that we have been building with this customer for several years. Furthermore, we continue to discuss the potential for including additional product for the customer's other product line. We also announced a design win with a global networking and a security as a service leader, a new customer standardizing on silicon for all its edge deployment scenarios. This makes us their sole edge networking hardware provider paving the way for additional multimillion dollar design wins. Liron EizenmanPresident & CEO at Silicom00:08:31This first design win with this customer encompasses several products, including several of our newest edge networking solutions pre integrated with Silicom's network interface cards. Initial deliveries should begin in the second half of twenty twenty five, which revenues from this design win starting to ramp up to over $3,000,000 annually from 2026. This was the result of a process which began a year ago when we initiated a discussion covering a specific product. Over time, the discussion expanded to more products and additional use cases leading to this design win as well as the potential for others. The fact that we can address all the edge networking needs of this customer confirms the value of our broad product portfolio and the strength of our offering. Liron EizenmanPresident & CEO at Silicom00:09:14Those wins underscore the traction of our renewed sales growth strategy, building a robust pipeline and strong base of recurring revenues for long term growth. The relationships are based on deep trust built over a long period of time and show slow but solid growth, supporting the success of our strategic plans. I want to provide some more color on our pipeline. Today, the pipeline of opportunities at the input of our design win funnel is broader than it has been for very long time, encompassing edge systems, smart NICs and FPGAs. Our target is to achieve between 7 9 additional new design wins in 2025. Liron EizenmanPresident & CEO at Silicom00:09:53I want to note that the sales cycle for our product is inherently long. In our experience, it takes between 9 12 months to achieve a design win from initial contact and then further 3 to 9 months working closely with the customer to initial revenues with up to 12 months for a meaningful ramp up. It therefore takes significant time from the first achieving a design win to when Silicom experienced significant recurring revenues. However, when we do reach a steady state of recurring revenues, those tend to provide a long tail over the lifetime of the customer's product, which can be many years. I want to highlight our new investor presentation, which you can find on the website, which includes examples of some of the many opportunities in our pipeline. Liron EizenmanPresident & CEO at Silicom00:10:36It also shows examples of the opportunities, which made it through the funnel and have become design wins and a source of revenue growth. We are seeing the positive impact of our focus on small to medium design wins, expanding the pool of future opportunities in addition to the deals with the potential for double digit 1,000,000 of dollars in annual revenue. We believe that during the coming years, we will see a lot of additional new opportunities at the input of the funnel, and we expect that more and more of those opportunities will convert into design wins. Furthermore, the potential growth is supported by increasingly diverse pipeline of design wins, including both new and existing customers. This pipeline includes leading names in the networking service providers and cybersecurity industries. Liron EizenmanPresident & CEO at Silicom00:11:20While we increased the number of those strategic engagements, we believe they will lead to more sustainable revenue growth by reducing our reliance on a few large strategic accounts. While our recent design wins will have minor positive impact on our accounts. While our recent design wins will have minor positive impact on our financial results Liron EizenmanPresident & CEO at Silicom00:11:38in 2025, we believe those and others that we expect to sign Liron EizenmanPresident & CEO at Silicom00:11:38in the coming months will serve as the foundation for much more meaningful growth in 2026. I note that if the opportunities in the pipeline ramp up faster than expected, we could achieve the goals of our strategic plan sooner than currently projected. In terms of our guidance for the Q1 of 2025, revenues are expected to remain stable at levels similar to those of the past few quarters between $14,000,000 $15,000,000 Looking further out, growth in 2025 is expected to be in the low single digits with strong double digit annual growth rate materializing gradually from 2026. In summary, we are pleased with our progress. We are very optimistic about our ability to continue and execute on our growth plan and fully focused on meeting our goal of creating value for our customers and for our shareholders. Liron EizenmanPresident & CEO at Silicom00:12:27We are advancing towards our mid- and long term goals with a robust pipeline that position us well for double digit growth from 2026 onwards. As I have mentioned, we aim to achieve 7 to 9 design wins in 2025, which will serve us as a key indicator of our progress. Looking further out, we continue to focus on creating strong long term value for our shareholders aiming at an EPS of above $3 when we reach annual revenues in the range of $150,000,000 to $160,000,000 A fast ramp up of a few of the potential deals we have within the pipeline may help us achieve this goal faster. We have a strong design win roster full of Tier 1 customers coupled with superb products and a robust pipeline of opportunities. We have a strong financial foundation with a solid balance sheet. Liron EizenmanPresident & CEO at Silicom00:13:15We continue to generate positive cash flow and we have an active share repurchase program that underscores our commitment to enhancing shareholder value. This new the new opportunities and design wins momentum that has grown throughout 2024 has increased the already high motivation and dedication of our excellent team who entered 2025 with excitement regarding Silicom's prospects. We look forward to reporting on our progress as we continue executing on our growth strategy. With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead. Eran GiladCFO & Company Secretary at Silicom00:13:49Thank you, Liron, and good day to everyone. Revenues for the Q4 of 2020 24 were $14,500,000 a decline from revenues of $18,800,000 as reported in the Q4 of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 76% Europe and Israel, 16% Far East and Rest of the World, 8%. During the last 12 months, our top our 2 10% plus customers together accounted for about 26% of our revenues. I will be presenting the rest of the financial results on a non GAAP basis, which excludes the non cash compensation expenses in respect of options and RSUs granted to directors, officers and employees impairment of goodwill, taxes on amortization and impairment of acquired intangible assets, impairment of intangible assets and related write offs as well as lease liabilities, financial expenses. Eran GiladCFO & Company Secretary at Silicom00:15:09For the full reconciliation from GAAP to non GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the Q4 of 2024 was $4,200,000 representing a gross margin of 29.1% and compared to a gross profit of $5,300,000 or gross margin of 28% in the Q4 of 2023. As discussed previously, in the near term, our gross margin is expected to be towards the lower end of our expected 27% to 32% range. And as our revenues grow from current levels over the longer term, it is expected to increase towards the upper end. Operating expenses in the Q4 of 2024 were $6,900,000 compared with $6,800,000 reported in the Q4 of 2023. Eran GiladCFO & Company Secretary at Silicom00:16:24Operating loss for for the Q4 of 2024 was $2,700,000 compared to operating loss of $1,500,000 as reported in the Q4 of 2023. Net loss for the quarter was $3,400,000 compared to a net loss of $500,000 in the Q4 of 2020 3. Loss per share in the quarter was $0.58 This is compared with net loss per share of 0 point 0 $7 as reported in the Q4 of last year. Now turning to the balance sheet. As of December 31, 2024, our working capital and marketable securities amounted to 100 and $121,000,000 including $41,000,000 in high quality inventory, accounts receivable net of accounts payable of $3,000,000 and $79,000,000 in cash, cash equivalents and highly rated marketable securities with no debt. Eran GiladCFO & Company Secretary at Silicom00:17:41During 2024, we used $10,000,000 for the repurchase of about 650,000 shares. That ends my summary. I would like to hand back over to the operator for questions and answers session. Operator? Operator00:18:04Thank you. Ladies and gentlemen, at this time, we will begin the question and answer The first question is from Ryan Coons of Needham and Company. Please go ahead. Jeffrey HopsonEquity Research Associate at Needham & Company00:18:37Hi, this is Jeff Hopson on for Ryan Kuntz at Needham. Thank you for the questions and thank you for the very comprehensive presentation today. It was very helpful to visualize all the opportunities and design wins at Silicom. Maybe if we could just go into some of those design wins. As you laid out the timeline, it does take a long time from design to revenue. Jeffrey HopsonEquity Research Associate at Needham & Company00:19:10What is then the typical contract length or yearly engagements for each of these design wins on average? Liron EizenmanPresident & CEO at Silicom00:19:21We estimate usually it spans around 4 to 5 years. So it's quite a lot of work to get started and win. But once we are there, usually a customer would go for us for 4 5 years and then discussions would start on the next generation, but that's very typical for us. Jeffrey HopsonEquity Research Associate at Needham & Company00:19:42And then for these new products or new designs, are there any architectural design changes? Or what's kind of the underlying competitive advantage that Silicon has for these new opportunities? Liron EizenmanPresident & CEO at Silicom00:19:58I mean, first of all, we are really at the I would say, at the edge of the newest technology working with the best silicon vendors out there and working very, very closely with them to make sure we are usually the first to be out with a product as long as the silicon launches. We are also launching our product. But I mean, that's not the only thing. We're also providing a full solution for our customers in the sense that we also understand software very well and we can give them all the supply chain capabilities they need around the product to be successful. But always being first and we invest quite heavily in R and D that puts us in a very strong position to be a great, let's say, also consultant to our customers about what to do. Liron EizenmanPresident & CEO at Silicom00:20:47Many times they come to us and ask us, oh, we have that kind of problem, how can you help us solve that? And we're able to give them. And one thing that really distinguish us from others is our very rich product line that we can actually also integrate our network interface cards, SmartNICs, FPGA cards or acceleration cards into our own systems and basically become a one stop shop for our customers to get everything they need on hardware from 1 company. Jeffrey HopsonEquity Research Associate at Needham & Company00:21:20Thank you. And for then the investment in R and D, are there any initial thoughts, I know for sales for 2025, you're thinking low single digit. Is there any initial estimates they Liron EizenmanPresident & CEO at Silicom00:21:46to expand dramatically, if at all, it will be something very specific that we need here or there, but nothing dramatic. Jeffrey HopsonEquity Research Associate at Needham & Company00:21:58Thank you. I'll re queue and let more questions. Operator00:22:22There are further questions from Ryan Coons of Needham and Company. Please go ahead. Jeffrey HopsonEquity Research Associate at Needham & Company00:22:31Hi, Jeff Hopson again. Just maybe 2 more from me. I know you guys had the long term target for gross margins of 28% to 32%. Is there any variability in the gross margin expectations for the 3 segments of opportunities that you laid out in the presentation? Liron EizenmanPresident & CEO at Silicom00:22:55I Liron EizenmanPresident & CEO at Silicom00:22:55mean, it's changing from product to product, from use case to use case. Still, we think the average that we'll see eventually after all taking all the different opportunities into play would be in the range that you mentioned 27 to 32. Some products obviously have more, some products have some less, but that's what we expect overall to stay in that range. Jeffrey HopsonEquity Research Associate at Needham & Company00:23:24Perfect. Thank you. And maybe just one more. You did have AI data infrastructure as one of the opportunities in SmartNIC. I guess overall for AI, is the technology at the edge yet or is that something that's too out in the future for being a real driver? Liron EizenmanPresident & CEO at Silicom00:23:47We think that for the edge, it's still, I would say, POC level at the moment. It's not full production right now. But definitely, it's something that comes up with customers from time to time. And we see still, we see on the other side, let's say, on the training side, on the big data center side, some of our customers are providing products to that to those goals, those use cases. So we enjoy through them. Liron EizenmanPresident & CEO at Silicom00:24:16And some other opportunities are actually maybe us doing something more direct with those kind of customers. We are pursuing both opportunities. Jeffrey HopsonEquity Research Associate at Needham & Company00:24:28Perfect. Thank you very much for the questions. Operator00:24:34The next question is from Jeff Meyers of Cobia Capital. Please go ahead. Jeffrey MeyersFounder & CIO at Cobia Capital Management00:24:43Hi, good morning. Maybe you could talk a little bit about the FPGA opportunity, where you've been with those products, what you see going forward and maybe also talk a little bit about gross margins on that front? Liron EizenmanPresident & CEO at Silicom00:25:00Absolutely. So with FPGA, we see several opportunities. We've been always pretty active in the high frequency trading. We continue to be there, but we also see the opportunities growing much more than that. We see actually opportunities together with many of the IP partners that we are partnering with. Liron EizenmanPresident & CEO at Silicom00:25:21We see opportunities in streaming. We see opportunities from security. We see opportunities in network equipment companies. So we see quite a lot of opportunities either we provide the IP through one of our partners and we're actually building quite an impressive network of IP partners working with us or actually the customer is taking upon themselves to do the actual IP development. So we have a few very nice opportunities, I would say, at the top of the pipeline right now. Liron EizenmanPresident & CEO at Silicom00:25:53We hope that they will materialize. And definitely from a gross margin perspective, usually those products are somewhat better. And we hope that indeed we can maintain a higher GP on those products. And but at the end of the day, I think with looking at all the opportunities we have, I don't think that the range of our overall GP would change, but definitely for those opportunities we will probably see higher GP than the average. Jeffrey MeyersFounder & CIO at Cobia Capital Management00:26:24Got it. Thanks, guys. Kenny GreenInvestor Relation at EK Global Investor Relations00:26:28Thanks, Jeff. Kenny GreenInvestor Relation at EK Global Investor Relations00:26:32Operator? Operator00:26:34There are no further questions at this time. Before I ask Mr. Eisenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www dotsilicom usa.com. Mr. Operator00:26:51Aizanon, would you like to make your concluding statement? Liron EizenmanPresident & CEO at Silicom00:26:55Thank you, operator. Thank you, everybody, for joining the call and for your interest in Silicom. We look forward Liron EizenmanPresident & CEO at Silicom00:27:00to hosting you on our next call in 3 months. Good day. Operator00:27:05Thank you. This concludes Silicom's Q4 2024 results conference call. Thank you for your participation. Operator00:27:12You may go ahead and disconnect.Read moreParticipantsExecutivesLiron EizenmanPresident & CEOEran GiladCFO & Company SecretaryAnalystsKenny GreenInvestor Relation at EK Global Investor RelationsJeffrey HopsonEquity Research Associate at Needham & CompanyJeffrey MeyersFounder & CIO at Cobia Capital ManagementPowered by