Q2 2021 Silicom Ltd Earnings Call
At the edge market the.
Speeds and extent of which solutions are adjusted by these market the.
<unk> the day, we rely increasingly on customers, which provide solutions in these evolving market.
The resulting in increasing dependence depend.
The dependence on a small number of larger customers difficulty in commercializing and marketing silicon.
Cash and services, maintaining and protecting brand recognition protection of intellectual property competition disruptions too.
The manufacturing and development, along with general disruption to the entire world economy relating to the spread of the novel Coronavirus, COVID-19, and other factors identify.
<unk> in the <unk>.
Documents filed by the company with the SEC.
In addition, following the Companys disclosure of certain non-GAAP financial measures in today's earnings release.
Such non-GAAP financial measures will be discussed during the club's touched.
Such non-GAAP measures are used by management to make strategic decisions focus future.
Actual results and evaluate the Companys current performance.
Management believes that the presentation of these non-GAAP financial measures is useful to investor understanding and assessment of the company's ongoing cooperation and prospects for the future.
Unless otherwise stated it should be assumed debt financing discussed in this conference call will be on a non-GAAP basis.
Non-GAAP financial measure of disclosed as I mentioned are provided as the ambition information to investors.
Order to provide them with it at the anti method for assessing our financial conditions and operating results.
These measures are not in accordance with of substitute for GAAP.
A full reconciliation of non-GAAP to GAAP financial measures is included.
In today's earnings release, which you can find on silicones website.
Now to the introductions of yesterday on the call on Mr. <unk> Orbach, the CEO and Mr. <unk> the CFO.
<unk> will begin with an overview of the results followed by Ron who will provide the analysis of the financing.
We will then turn over the cause of the question.
In the non sufficient Andrew.
And with debt I would like to hand over the course of the shaky shaky. Please.
Thank you Edward.
I would like to welcome all of you to our conference call to discuss our second quarter 2021 results.
We are very pleased with the solid and ongoing improvement in our financial.
<unk> sales for this quarter.
We reported 31% year over year increase in revenues to over $30 million demonstrating the 'twenty 'twenty..1 is on track and the expected growth we have been discussing in recent quarters continues.
We reported our 66th quarter of continued profitability.
Result, with net income of $3 million up 59% year over year EPS was at 42, an increase of 62% year over year. This significantly higher growth in net income and EPS demonstrates the inherent leverage of our business model.
We.
We completed our second $15 million buyback in the quarter and started a new third 15 million line in.
In total we purchased 83000 shares in the quarter amounted 2 of $3.6 million on.
Our strong cash position and ongoing cash generation allows us to continue.
<unk> contribute to increased shareholder value in distillate at the end of the quarter, we had over $74 million of net cash on the balance sheet.
We continue to advance with our strategy that we have discussed in recent quarters.
And as our 2 recent design wins demonstrate we continued.
To build our penetration in the <unk> slash Orion as well as the SD Wan market leveraging further from the interest growing market demand.
Okay.
In May we were honored that 1 of the worlds largest mobile infrastructure equipment providers selected our acceleration.
The cards for the next generation <unk> mobile networks.
Not only has this customer selected our current solution, but even more importantly understanding our capabilities. It has also decided to work with us in parallel on a different version of the solution, which by itself would be an important contribution to our portfolio.
Portfolio on top of the requirements of this specific customers.
This was our third major of <unk> win with a global leader in only 6 months, but it's also the first time that of major <unk> equipment vendor had selected our solution.
The third major <unk> win is a solid demonstration.
<unk> growing leadership in the <unk> space and in particular in the distributed unit performance booster market. It also helps us expand our momentum in this market segment.
A few weeks later, we are of very very pleased the Telefonica Tech, which is telefonica is holding for digital businesses.
1 of our line as part of 1 of the world's largest telcos selected our flagship <unk> smart platform for its global SD Wan solution for the small to medium enterprise segment sales.
<unk> strongly valued our smart platform differentiated feature set for the Disaggregated network environment. We also demonstrated.
The superior performance to price ratio as well as flawless integration of our hardware with the software platform.
We also enjoyed a highly effective collaboration effort and strong working relationship relationship with Telefonica Tech and the other vendors involved in the project, which we believe will lead to additional.
Additional wins down the road.
Telefonica <unk> aims to offering in house SD Wan solution for small to medium sized businesses or smbs as they are known enabling them to leverage the decoupled network concept.
This approach will help smbs maximizing the productivity agility and flexibility.
Australia of cloud based applications, while reducing provisioning upgrade and service delivery costs.
In fact, we feel that in the current and perhaps future post Corona world, where remote and work from home is the new norm the market demand from Smbs for this type of.
Of service will be very significant and grow quickly whereby such growth will obviously be reflected in our SD Wan related revenues debt.
<unk> expect the deployment of this SD branch service to begin ramping up in 2022.
As more and more business applications.
Let's move over to the cloud, we believe that businesses will increasingly see the power of the SD Wan concept to give them connectivity that is more robust flexible and cost effective than ever before we expect the transition to drive.
To drive multi year of growth for SD Wan service providers like Telefonica.
And therefore the screens this win represents multiyear growth potential for silicon.
We aim to continue our collaboration with Telefonica Tech on both debt as well as additional project deepening our positioning as 1 of the go to sources for advanced solutions, enabling the disaggregated and decoupled.
All of the strategy.
Beyond these 2 key design wins that we focused on and announced during the second quarter. We continued to bring further new customers and design wins that we did not publicly.
We continue to see of good conversion rate of our long and healthy pipeline into new design wins.
Especially in the SD Wan and <unk> market segments, and we do believe that that accumulation of such wins is indeed, what is fueling our growth.
Before moving into onto our guidance I would like to address the global shortage of electronic components and materials, which.
<unk> has been ongoing now since early 2021, and which we addressed in our last conference calls.
Similar to all our peers, we continue to experience the shortages at gross all our suppliers I stress that this is an industry wide issue affecting everyone in a very significantly.
Component lead times continue to increase and the scar cities increasing price the extent of these shortages of to a level, we have never seen before and the analysts expected to persist throughout this year and at least into the first half of next year.
Given our careful planning.
And prudent inventory management, we've been able to resolve most of the component shortage issues in the second quarter and reported revenue was slightly better than our guidance.
I note that the longer lead times could delay the possible upside we would gain from faster than forecasted ramp ups of existing design.
<unk> as well as the additional potential from new design wins in our pipeline. Furthermore, despite our meticulous and early planning it is possible thats certain vendors that are currently scheduled to deliver on time with the commit as we move forward.
However.
Continue to work hard and we are leveraging our strong cash position to ensure that we have sufficient inventory of parts available to meet the demand for our products.
I would like to add we are leveraging our strong relationship with the vendors, especially income. In addition, the caliber of our large customers.
We reach are thirsting for our products and ensure our higher level on many of our vendors priority list.
I would like to follow up and discuss all of our guidance.
For the first quarter of 2021, while data for the third quarter of 2021, while taking the company.
Component shortages issue into consideration, we expect revenues of between $32 million on $33 million, which at the midpoint represents strong first 9 months year over year revenue growth of 24%.
While the current component shortage ads increased revenue uncertainty.
<unk> into the second half of the year, our careful planning still allows us to narrow the range of our previously issued annual guidance of between $120 million and $130 million and we expect revenue to fall in the upper part of debt revenue range with that for the fourth quarter of 2021, we expect.
He has to grow to between $34 million and $36 million.
More generally we expect that the coming few years 4 cynical, we see performance well ahead of what we have achieved over the past few years and debt. We will continue to achieve ongoing revenue growth it.
At a double digit compound annual growth rate for several years ahead.
<unk>.
Yes.
In summary, our momentum is strong and our recent wins position us exceptionally well for maintaining and building our on our growth in the coming quarters.
Many of the end.
Revenues, we serve are performing strongly and we continue to support all of our clients connectivity needs in today's hottest networking market segments.
Our pipeline remains healthy and we expect that our increasing gross per of wins and growing momentum to lead to further <unk> and SD Wan opportunities.
Mark in the coming months. Furthermore, we see the recent design wins, having much greater scaling potential than what we have traditionally experienced.
It represents an opportunity for sustained long term revenue as the sentiment and broaden our relationships.
With some of the world's largest.
<unk> needs beyond that many of the new design wins bring a strong credibility in the <unk> space, which in itself has the potential to bring us new customers.
More broadly our long and growing list of design wins generating ongoing orders, our solid baseline of activities and strong market fundamentals with.
Comp per focus on some of the fastest growing markets in the networking space as well as our current long and deep pipeline makes us ever more optimistic that we are well positioned for strong growth in 2021 and beyond.
With that I will now hand over the course of a run for a detailed review of the quarter's results.
Ryan please.
With our head.
Thank you <unk> and before.
Revenues for the second quarter of 2021 were $33 million.
This is a year over year increase of 31% compared with revenues of $23 million.
The reported in the second quarter of last year.
Our geographical revenue breakdown over the last 12 months, whereas follows.
North America <unk>.
61%, Europe, and Israel, 31% far east and the rest of the world 8%.
During the last 12 months, our top 3 customers together accounted for about 35% of our revenues.
I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the noncash compensation expenses.
Net of options.
On our refuse granted to directors officers and employees acquisition related adjustments as well as lease liabilities financial expenses.
For the full reconciliation from GAAP to non-GAAP numbers. Please refer to the press release, we issued earlier today.
Gross profit for the second quarter of 2021 was $10.8 million.
Representing a gross margin of 35, 8% at the upper end of the range of our gross margin guidance of 32% to 30.
236%.
Compared to the gross profit of $7.8 million or gross margin of 34% in the setup in the second quarter of 2020.
The variance in gross margin is a function of the specific product mix.
<unk> in the quarter.
Operating expenses in the second quarter of 2021 were $7.3 million of slight increase compared with $7.1 million in the previous quarter and compared with $5.9 million in the second quarter of 2020.
And most of the increase compared to last year is R&D related and as we discussed last quarter has been planned and represents our continued significant investment in developing new products IP and technologies and technologists.
Operating income.
Income for the second quarter of 2021 was $3.6 million, an increase of 83% compared to operating income of $2 million.
As reported in the second quarter of 2020.
Net income for the quarter was 2.
$2.9 million, an increase of 59% compared to $1.8 million in the second quarter of 2020.
Earnings per diluted share in the quarter well per.
Earnings per diluted share in the quarter were 42 of.
Please.
The year over year increase of 62% compare compared with EPS of <unk> 26 cents as reported in the second quarter of last year.
Now turning to the balance sheet as of June 32021, the company's cash cash equivalents and Mark.
This of Securities totaled $74.3 million with no debt or $10.88 per outstanding share.
During the quarter, we completed our second 50 million 15.
<unk> 15 million share buyback plan.
<unk>.
<unk>.
Executed on our third 15 million share buyback plan, which we started on May 4.2021.
In total since we started our first buyback program about 2 weeks ago and up until June 32021.
<unk> of approximately 925.
Sure at the total cost of approximately $32.3 million.
That ends my summary, and now back to the operator for question and answer session on.
Operator.
Thank you.
And gentlemen at this time on will begin the question and answer session. If you have a question. Please press star 1 if you wish to cancel your request. Please press star 2 of you are using speaker equipment on them.
Handset before pressing the numbers on your questions I'll be pulled on the order. They are received please standby while we poll for your questions.
<unk> per ton question from Alex Henderson of Needham <unk> Company. Please go ahead.
Thanks.
Just congratulations on all of these great.
Large wins that you're delivering.
I wanted to.
Talk a little bit about the supply constraints relative to.
In the quarter that was just printed.
Obviously, you've seen some pretty strong orders, but it's hard to tell the timing of windows.
Order should kick in and several of them I think you've talked about kicking in more on the 22 time frame.
So what is there enough demand that if you hadn't had more.
Part of the.
And more availability.
I know you've got more than you had anticipated book.
More than that.
That you would have delivered further upside to the revenue or where you.
Not supply constrained because your good job of managing.
Your inventory levels.
Could.
Whether there was upside.
<unk>.
Well first of all there was an upside in demand and I mean, if I needed to give you.
Just a bottom line answer as to whether or not if we had no constraints at all on components if.
If we would have been able to deliver more than the answer is yes, now that being said I mean, we are investing a lot of time and I would say minimizing the impact of the shortages and that includes both in terms of inventory planning as well as in time invested in talking.
King to all our vendors and pushing them on explaining to them. What we really believe in that if they help us that would be positive for more business moving forward. So it's a combination of both but if you just needed to have the bottom line. Yes, if we didn't have any cost range of materials.
Would of been able to deliver more.
Similarly, when you look at the third quarter guide.
I'm assuming that you were also expecting continued constraints to limit upside to the numbers based on.
On what Youre seeing there or are we talking about.
2 or 3 or 4 of $5 million worth of potential ups.
Side left off the guide because of that.
Well I don't have a number but the once again I mean, obviously, if we have no clear strength.
We would've been able to deliver somewhat more I do not know exactly how much more I would also like to say that this number that we're giving you right now.
On the other side.
It is based on what we know right now on our planning that I discussed before in these times, sometimes vendors do debt commit to what they used to commit to and there are surprises. So there is on the other side there is still risk in delivering that as well, but if you're.
Im asking from a pure demand perspective, yes, we would've been able to deliver some with more.
So.
Going out into the fourth quarter of the guide that you're implying is kind of low single digits.
Growth rate, it's a pretty big the cell.
Can.
We're out of about why that is.
Is occurring there is it just simply because of the much easier comps in the first 3 quarters.
Against the much tougher comp is it the supply.
Constraints.
Further out.
So the tighter in the harder to forecast.
What's behind that.
So first of all of I would like to say that when you look at the full year that even with the fourth quarter included in there you would still see a year over year of growth, we take the medians of approximately 18% or something like that of 19%, which I.
Can you tell me is significant.
Now that being said I would also agree on 1 of the things that <unk> said, yes, I mean, the impact of the shortages in material.
It is not.
The being reduced for the fourth quarter, but rather the other way around so yes.
I believe we a we have even more difficulties all of which are taken into consideration. When we provided our guidance, but we do have more difficulties in terms of material shortages.
For the fourth quarter than before that I would like to mention that we we started.
Started to Glenn our inventory not only when this crisis started but also before that which is why at the beginning of we were fully prepared with inventory against the upcoming orders as we move into this scenario of prices and shortage.
Of material.
The scenario becomes even.
Even more challenging which is why I would say that the results of the fourth quarter. The impact on the fourth quarter result is somewhat higher than the impact on the third quarter, then the impact on the second quarter and so on and so forth.
So.
When I look at the very.
Wins that you've had over the course of the last 6 months and with the launch of the even star product in March It seems pretty clear I mean, there are multiple large global tier 1 type of customers here.
That there's a lot of future demand implied by that.
Very you talk about the timeline for when you think those players will kick in whether those.
<unk> are in the numbers in the back half of the year or are more of a 'twenty..2 number 23 number how do we think about that.
In terms of the.
Measure.
That the.
The outlook.
Well first of all are obviously not all of these projects will kick in at the same time and there are differences between these projects, but if I had to provide the generic answer to the question I would say that the impact in 2021 is minimum of these projects.
<unk> is that we would feel of significant part of that in 2022, and possibly even more in 2020.
I see.
Is the pipeline is rich as the rearview mirror.
Yes.
1 of the surprises in the quarter.
Measured against the backdrop of.
People expediting most companies are seeing compression in the gross margins you guys are seeing margins coming in at the higher end of the.
The spectrum can you talk about why that's the case with the larger deals.
The difficult challenges getting.
Arts, causing expediting would cause of the opposite to happen.
Well I would say that from a day to day perspective, we do feel exactly the same pressure. However, we do have well I would call of the privilege of having a very.
The wide I would say portfolio.
And of which represent the mix.
And the gross margin that we could charge. The clean then for a variety of reasons. So the main reason for it is somewhat higher gross margin in this quarter is simply the mix of product of <unk>.
We are different than anywhere anytime.
Anyone else, a while everyone else prices or costs are increased we were able to reduce the price of components and I think we're doing good but we're not doing that good I mean, this kind of environment right now does not allow for.
The cost reductions it goes the other way around and we are just like everyone else.
The somewhat maybe negotiating tougher but that would not constitute the difference the reason behind the increase in gross margin is the mix of products sold in this quarter.
So.
We've been tracking a lot of the apply.
Appliance related.
More traditional customer base.
And then very positively surprised at how robust the you know the.
The demand.
From enterprises are for.
Data Center and campus branch infrastructure.
With the order rates are ranging from 15 to as much as 30% growth.
And what I would describe as traditional products that have been.
Areas that had been declining is that part of what's going on here is the underneath the surface here.
Your traditional business of appliances into.
A variety of of traditional.
Customers is seeing a very.
The strong uptake and that's driving those that mix.
Uh huh.
In terms of the mix.
As part of that is coming from what you're saying I mean that we did have some I would say traditional customers.
The 2 of certain extent.
Increased their demand and the.
Consequently, whatever they took from us during the quarters, but the mix difference is not only due to traditional cash.
Customers and new customers, even within the new customers and the new markets.
The day that mix and the gross margins.
The can vary between the various products.
<unk> various customers, sometimes simply due to the fact that in a certain of.
The opportunity we were able to.
Difficultly of reduce the cost of certain components, so while I would say.
What you said is definitely a part of that it's not only book there.
The difference in gross margins of various products and customers.
Even with the new market segments that we're addressing.
So just.
Just to take those comments out into the gross margins in the back half of the year or are we looking at more like last year's gross margins or are we looking more like first half of this year's gross margins in the back half.
Well I.
The only thing that I am saying is that for quarter and then obvious.
Obviously, there would be an average of that book order was still within.
The the within what we would define for gross margin, which is 32 to 36 and the Q3 and Q4 may fall within the lower part of that or the higher part of that and then on.
Presuming.
On that when you calculate the average may be somewhat higher.
The so maybe 34 something or something like that.
And then just 1 more question the.
Interest income line went negative.
I'm running it from.
On the.
400.
$5000 in prior quarters is that kind of snapback in the.
The September quarter or is there something unusual in that that caused the causes to go negative.
You kind of huge cash balance.
The main reason is that the exchange rate.
May be a big factor.
On the financial income number.
So it depends on every quarter it depends on the actual exchange rates again.
The shekel and the against the are there any share currency.
This quarter the effect was the negative.
Okay. So if the if we exclude the the.
The volatility in exchange.
Would that have been a $400000 kind of number in that line.
As it was in the first quarter is that the the ongoing run rate, we should be using assuming flat currency.
In the second half of the year.
I would say that if we exclude the exchange rate.
Perfect.
The real the real lift.
The economic economic number is approximately $100000 per the quarter.
Okay. So we should be using a 100.
Hum.
8 of that detail and I will cede the floor of thanks.
The next question is from the Feraheme Mascaro. Please go ahead.
Yeah.
So with the sale.
No.
On the first question I wanted to ask today, what's about the debt, but the onset.
Part of that is.
But we had the sports I think that debt we have the deal we still have plenty of assets and.
And another 1 with Ericsson.
The non disclosed.
Its potential of.
Thank you.
The card it'll be the about the space.
Using the same case as with the Facebook project that we spoke about the first quarter. Thank you.
Yeah.
Well first of all first of all indeed, we have identified the Telefonica Tech.
<unk>.
We have not identified.
The second customer, so obviously I'm not referring to the name.
The.
I would say.
The praetor.
Potential in general of the deal with Telefonica debt is not yet very clear even.
Obviously, it's going to be millions of dollars.
And if it's going to be.
The low number of millions of dollars day would consider that to be of failure.
But it's a little bit difficult at the new service the 2 of launching so what exactly the volume will be.
The we don't know.
Moving to add to the second win I would say that we expect out of the specific brought up that we're selling to the customer we're expecting a few million dollars per year.
Digit.
The but we consider that penetration to does customer is extremely.
The reported we believe we would be able to sell more products to this customer as we move forward.
Thank you I said, the second name because Ericsson the recently announced that the will be using in the acceleration.
<unk> mid band Global line of technology, and I think thats.
Using this guidance also ericsson and the.
First of all is that the global line of solutions could where we sit at the center.
It's the way there. So I don't know if you had been say income all of that.
No.
Okay. Okay.
Of that.
Okay.
Right now of all of that the islands telecom infra projects each quarter, we hope the hot tub.
<unk> here.
Poland MTN Africa Telecom.
Have you disclosed that they were committed to the telecom new Copenhagen is open.
So.
<unk>.
So I think that we haven't stopped program on.
I'm not sure if I haven't.
Regarding the proposed at the share connections.
Hi.
I am not sure I understood what I'm not sure I understood. The question is obviously <unk>.
As we have said we are a part of the even stopped.
The program.
We have not delivered the units yet.
The long term program.
The.
I am not expecting revenues of this program.
The significant this year.
It is obviously up too.
The participants within.
The program to decide what exactly the theyre going to taken from whom.
And im not sure of that answered your question to be honest I'm ready if you would like to direct me again, what the question was I would try to respond to that more accurately.
Yes, I mean.
Is there any kind.
Kind of.
The relationship between even tie on telecom infra project, because lots of companies LIBOR on the phone or MTN Africa said that they were working with the telecom infra bursting. So maybe we've got the clicker.
Is there a relationship between whom.
Yes, Evan.
<unk> for profit.
I am not familiar with this kind of a relationship.
Okay. Okay.
So it is now 8 months away.
None of the 5 D sales rise filter is gross.
<unk> total.
India is there any kind of day, you can give us about the b feels right.
Yes, I can give you an update about that.
The customer has decided to use I would say a next generation of solutions for this field, so price, which is why we're still working.
With the customers in updating.
The what we wanted to do at the beginning.
That means actually that the the period or the timelines for this time.
The field trials would be postponed into next year.
Okay and 1 of my question at all of that day.
During 2019, we had delays in the SD Wan on FPGA deployments for a few quarters the.
<unk> believes that the delays are already behind us which delays.
Yes, we had delays in the SD Wan of net.
The deployment in 2019 for a few quarters delay the arrow.
I'll leave that the delayed.
Each delay for a few customers that we spoke.
<unk> SD Wan on SBA.
I am not sure what delays youre, referring to.
The right.
No and we do not have any delays right now.
When I say delay I mean, the 3 commit something to our customers that we cannot deliver on the day of committed.
The.
If the delays that you were talking about were due to COVID-19.
I'm not sure, but it's still I mean, we do not have any of the noise right now, but obviously with the increasing demand coming from our customers. We are not always able to deliver goods to them on the dates that they wish to get the goods.
Especially in the environment of the shortages of materials, but im not.
Right now there are not any.
The significant delays companywide or something like that that I can talk about the there's nothing like that.
Okay.
Everyone.
So speaking about inflation on right now my questions here when you have price.
Pricing power to increase the prices of the design wins, we see sustaining the level of inflation on that you're experiencing the inflation right now inflation no.
No no impact.
Okay, but do you have a pricing power to the ingredients the pricing.
On the design wins.
See sustained integration on the issue of the <unk>.
Pricing power is an issue of the policy.
We work with our customers, even if we have the power once our customers become dependent on us to increase the price for a certain demand where varian.
Very reluctant to do that because.
We work closely with our customers, making them partners. So even if we do have the power of the power, we do not do that.
Okay. Thank you.
Last question.
The assembly of <unk>.
Interest semiconductor companies.
And he's like well comment on media presenting plan to develop <unk> for the use debt to board. The opened 1 network model. The youre seeing that these increases the competition to your products.
Well I would say in general that the competition of 2 hour product will increase whereas.
Weighted by Qualcomm or Nvidia or maybe some other players as well and yes, we are teamed with Intel.
The.
Let us just say that if we get.
The market share that Intel is planning to get for it for itself or even.
Half of that I would be very happy.
Okay perfect.
Thank you.
Many many things in the rest of the book.
Any additional questions. Please press star 1 if you wish to cancel your request. Please press star 2 please.
While we are pulling from more questions.
There is a follow up question from Alex Henderson of Needham <unk> Company. Please go ahead.
Thanks.
Clearly theres been a lot of changeover at Intel.
Pat Kensler coming in and the like.
And realignment of their programs and policies.
Architectural decisions and things can you talk about whether the spin.
Proven.
Tom that is slower erosion relative to your positioning there.
Well right now, it's obviously status quo.
We hope.
The there would be some improvement in some areas.
I would say in general that we are really working.
Closely with Intel.
And when I say with Intel it means that we're talking to I would say.
Mostly 3 divisions within Intel so with 2 of them were working really really closely and really have partnership relationships.
And this is where our.
Gross.
On the coming from these are the areas where the growth is coming from there are other divisions.
The third line and possibly some others.
Where we did not experience exactly the same kind of per relationship.
And due to these organizational changes were hoping that possibly.
We would be able to even increase I would say our partnership penetration within in Dell for the better, but we're not sure of that would happen.
And.
Again looking at the.
Sure.
What they're seeing in terms of the projects I know the they've historically handed fair amount of business off to you where it was the the right scale for you, but not necessarily the right scale for them.
Are you still seeing that relationship and do you see.
A good pipeline of.
Projects coming over from them.
Well first of all we see a good line of projects coming from them and we're seeing during the last year that even though in general what <unk> said before is still correct, but there are some projects.
They are saying no matter, what we would give these to silicon even if the scaling.
If they are required scale is high simply because we I mean, they are maybe turning resources into the processors or whatever so in some situations that we worked with them they are allowing us to actually be the only ones acting in their names without them themselves.
I didn't get out of the product, which would go to the.
Hi, Scott.
But in general it's the same approach yes.
Great.
The answers thank you.
Thank you.
The next question is from Robert Sussman from Bentley.
<unk>. Please go ahead.
Thank you could you update us on the status I don't think this has been asked of the CPE business with the 2 large telcos last I heard 1 had not started at all on the other 1 was moving ahead, but very slowly.
So.
So the state of says that the last line, which is moving ahead and by the way very slowly.
Slowly out of what we expected, but it's not that flow I mean, we're still selling.
On a quiet quite of few millions of dollars to this.
The telco and.
The other 1 I would update that there that we begin to see of certain change in there at least in terms of.
Ah requests coming up again, and so on and so forth.
I'm not sure of that Theyre really ramping up because it happened in the past and then we got disappointed.
But just recently during this quarter, we have been able to say.
The.
And.
Even this second telco.
Is are there is the possibility that it would be ramping up now that being said.
The I would say that these 2.
Telcos are.
A relatively old story overall of our CPE business is moving.
Tens of millions of dollars of CPE is already.
And this is the most I would say the area of our business, which is growing and the fastest way.
Okay, just a follow up to that.
What is the annual of potential of these 2 telcos.
When they really ramp up.
Yeah well.
Even when this when.
On the projects with them started I may have been able to give.
If the response and I think we even included such of response in the Prs.
The 3 presented when we announced these wins.
I would say that right now I really don't know.
It is very difficult to say we have been disappointed.
Certain extent with.
With 1 of them even in the fall through the other 1 so it potential day tens.
Tens of millions of dollars of each whether or not this would happen and what is the chance that that would happen with the experience of last year, so not very high so.
But once again.
I mean, if youre asking note about these 2 telcos and the 1.
Range of which we received maybe 3 of 4 years ago, but rather of the SD Wan or CPE business as the whole than the potential there I would tell you it is huge.
Selling right now right now of tens of millions of dollars.
And I would just flinch before saying that the potential there could come to $100 million or even more.
Just the more staying 100 net.
When you say $100 million on the annual basis yeah.
And if it is not with the 2 telcos can you tell us.
Products that youre selling into the CPE market and give us an idea of who the customers may be 4 well, we cannot give an idea about the customers.
We have issued several of Prs.
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Providing some examples of wins.
The.
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We had.
The there are quite of few customers to which we are selling these units.
And I see the potential both of these customers and with additional customers with which we have our pipeline with.
As a very strongly as I said speaking about potential commodity.
Combining all of these together, yes, it could come to $100 million not immediately per year not immediately not the next month, but speaking about the potential the potential is there.
Okay. Thank you very much.
There.
The further questions at this time before I ask Mr. Orbach from go ahead with this conclude closing statement I would like to remind participants on a replay of this call will be available by tomorrow on <unk>.
Silicon on the website www dot silicon Dash USA Dot com, Mr. Orbach would you like to measure of concluding statement.
Yes. Thank.
Thank you operator, thank you everybody for joining the call. We wish you all health and we look forward to costing you on our next call in 3 months time good day.
Thank you. This concludes telecom second quarter 2021 results conference call. Thank you for your participation you May go ahead of them disconnect.
There are no.
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