Q4 2021 Silicom Ltd Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the Silicon fourth quarter 2021 results Conference call. All participants are at present in listen only mode. Following management's formal presentation.
Speaker 4: Ladies and gentlemen, thank you for standing by. Welcome to the Silicon Fourth Quarter 2021 Results Conference.
Speaker 4: 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.
Instructions will be given for the question and answer session.
As a reminder, this conference is being recorded you should have all received by now the Companys press release, if you have not received it please contact telecoms Investor relations team at GK Investor Relations and public relations at one to one to 3788040, our view it with them in the news section of the company's website.
Speaker 4: You should have all received by now the company's press release. If you have not received it, please contact Silicon's investor relations team at GK Investor and Public Relations at 1-212-378-8040 or view it in the news section of the company's website www.silicon-usa.com.
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I'd now like to hand over the call to Mr. Kenny Green of GK Investor Relations. Mr. Green would you like to begin. Please. Thank you operator I would like to welcome all of you to Silicon fourth quarter and full year 2021 results conference call.
Speaker 5: Before we start, I would like to draw your attention to the following Safe Harbor State
Well, we start I would like to draw your attention to the following safe Harbor statement.
This conference call contains projections or other forward looking statements regarding future events or the future performance of the company. These statements are only predictions and May change as time passes silicon does not assume any obligation to update that information.
Speaker 5: This conference call contains projections or other forward-looking statements regarding future events or the future performance of the company.
Speaker 5: These statements are only predictions and may change as time passes. Silicon does not assume any obligation to update that information.
Speaker 5: Actual events or results may differ materially from those projected, including as a result of our increasing dependence for substantial revenue growth on a limited number of customers in the evolving cloud-based SD-WAN, NFV, and Edge markets, the speed and extent to which solutions are adopted by these markets, the likelihood that we will rely increasingly on customers which provide solutions in these evolving markets, resulting in an increasing dependence on a smaller number of larger customers.
Actual events or results may differ materially from those projected including as a result of our increasing dependence.
Actual revenue growth on a limited number of customers in the evolving cloud based SD Wan NFC and edge market, the speed and extent to which solutions are adopted by these market the likelihood that we will.
That we will rely increasingly on customers, which provide solutions in these evolving market, resulting in an increasing dependence on a smaller number of larger customers difficulty commercializing and marketing <unk>.
Speaker 5: Difficulty commercializing and marketing Silicon's products and services, maintaining protection of brand recognition, protection of IT, competition, disruptions to manufacturing and development, along with general disruptions to the entire world economy related to the spread of the novel coronavirus, COVID-19, and other factors identified in the documents filed by the company with the FEC.
<unk> services, maintaining protection protection of brand recognition protection of IP competition disruptions to our manufacturing and development along with general disruption.
Ty World economy related to the spread of the novel Coronavirus, COVID-19, and other factors identified in the documents filed by the company with the SEC.
In addition, following the Companys disclosure of certain non-GAAP financial measures in states earnings release, such non-GAAP financial measures will be discussed during this call.
Speaker 5: 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 financial measures are used by management to make strategic decisions forecast future results and evaluate the companys current performance.
Speaker 5: Such long GAAP financial measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance.
Management believes that the presentation of these non-GAAP financial measures are useful to investors understanding and assessment of the company's ongoing cooperation and prospects for the future unless otherwise stated it should be assumed that financials discussed in today's conference call will be on a non-GAAP basis.
Speaker 5: Management believes that the presentation of these non-GAAP financial measures are useful to investors' understanding and assessment of a company's ongoing core operations and prospects.
Speaker 5: Unless otherwise stated, it should be assumed that financials discussed in today's conference call will be on a non-GAAP basis.
Speaker 5: non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide with an alternative method for assessing our 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 press release, which you can find on Silicon's website.
non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide with an alternative method for assessing our financial condition and operating results. These measures are not in accordance with or a substitute for GAAP and a full reconciliation of non-GAAP to GAAP financial measures are included in today's press release.
Which you can find on silicones website.
With us on the line today are Mr. <unk>, Orbach, CEO and Mr. <unk> Gilad, our CFO will begin with an overview of the results followed by Ron who will provide the analysis of the financials.
Speaker 5: With us on the line today are Mr. Shaiqa Orbach, CEO , and Mr. Eran Gilad, CFO . Shaiqa will begin with an overview of the results, followed by Eran who will provide the analysis of the financials.
Speaker 5: After that, we will turn over the call to the question and answer session. And with that, I would now like to hand the call over to Shaika. Shaika, please go ahead.
After that we will turn over the call to the question and answer session and with that I would now like to hand, the call over to Shakeout Shackup. Please go ahead.
Thank you Kenny.
I would like to welcome all of you to our financial results conference call discussing our fourth quarter and summarizing our full year 2021 results.
Speaker 6: I would like to welcome all of you to our financial results conference call discussing our fourth quarter and summarizing our full year 2021 results.
Speaker 6: We are very pleased with the solid results of the fourth quarter, which were ahead of our targets, as well as the strong results for 2021 in what has been, again, not an easy year for anybody. For the quarter, we reported a 10% sequential growth and year-over-year growth of 7% in revenues to $36.3 million, ahead of our expectations of between $34 and $36 million.
We are very pleased with the solid results of the fourth quarter, which were ahead of our targets as well as the strong results for 2021 in what has been again not an easy year for anybody for the quarter, we reported a 10% sequential growth and year over year growth of 7% in revenues to 36.
$3 million ahead of our expectations of between 34 and $36 million.
Speaker 6: For 2021, we reported a solid 20% year-over-year growth in revenues to 128.5 million at the high end of our 120 to 130 million range issued at this time last year, performance we were very pleased with. Looking back at 2021, we would define this year as a key inflection point in the demand for our products in which Silicon returned to strong growth.
For 2020 , one we reported a solid 20% year over year growth in revenues to $128 5 million at the high end of our $120 million to $130 million range issued at this time last year performance, we're very pleased with <unk>.
Looking back at 2021, we would be fine. This year is a key inflection point in the demand for our products and reach silicon returned to strong growth.
We are all the more pleased with our 2021 performance delivering what we originally were targeting to achieve against their progressively worsening background of component shortages and tight supply chains throughout the year. That's all in our industry experienced we placed significant.
Speaker 6: We are all the more pleased with our 2021 performance, delivering what we originally were targeting to achieve against a progressively worsening background of component shortages and tight supply chains throughout the year that all in our industry experienced. We placed significant effort throughout the year into maximizing what we were able to manufacture and deliver, meeting as much of the high demand as possible.
Effort throughout a year into maximizing what we were able to manufacture and deliver meeting as much of the high demand as possible.
Speaker 6: Demand is in excess of what is currently possible to supply. And underlies my optimism as we exit 2021, that we are at a real inflection point of growth for Silicon.
Demand is in excess of what is currently possible to supply and underlies my optimism as we exit 2021 that we are at a real inflection point of growth for silicone.
In fact without the component shortages, which negatively impacted our revenues by a few million dollars. We would've reported full year 2021 revenue well ahead of the guidance range, we issued last year.
Speaker 6: In fact, without the component shortages, which negatively impacted our revenues by a few million dollars, we would have reported full year 2021 revenue well ahead of the guidance range we issued last year.
I will provide a more detailed update on the shortage in a few moments as well as our guidance for the upcoming quarter.
Speaker 6: I will provide a more detailed update on the shortage in a few moments, as well as our guidance for the upcoming quarter.
We are reporting.
Speaker 6: We reported our 68th quarter of continued profitability with net income of $4.5 million, up 25% sequentially and 14% year-over-year, while earnings per share was at $0.65, up 25% sequentially and 16% year-over-year.
Bought at our 68 quarter of continued profitability with net income of $4 5 million up 25% sequentially and 14% year over year, while earnings per share was at 65.
25% sequentially and 16% year over year looking at 2021 as a whole we reported net income of $14 million up 27% year over year, and EPS of 2.0, $1 up 31% year over year.
Speaker 6: Looking at 2021 as a whole, we reported net income of $14 million up 27% year-over-year and EPS of $2.01 up 31% year-over-year.
Speaker 6: I would like to highlight an important aspect of the results. While in 2020 we reported $10.6 million in operating income at a margin of 9.9%, in 2021 we reported $15.9 million, an increase of 50%, at an improved operating margin of 12.4%.
I would like to highlight an important aspect of the results. While in 2020, we reported $10 $6 million in operating income at a margin of nine 9% in 'twenty 'twenty. One we reported $15 9 million, an increase of 50% and an improved operating margin of 12.
0.4%. This was due in part to our 20% growth in revenue, while only needing to grow opex by 14%.
Speaker 6: This was due in part to our 20% growth in revenue, while only needing to grow OPEX by 14%. This demonstrates the strong operating leverage inherent to our business.
It demonstrates the strong operating leverage inherent to our business model.
In terms of shareholder value creation, our strong balance sheet and cash generation allowed us to continue our current $15 million share buyback program and repurchased three 6 million.
Speaker 6: In terms of shareholder value creation, our strong balance sheet and cash generation allowed us to continue our current $15 million share buyback program, and we purchased $3.6 million in Silicon shares in the quarter. I note that since we started our share buyback programs in May 2019, we have purchased $39.1 million in Silicon shares.
In silicon shares in the quarter.
Note that since we started our share buyback program in May 2019, we have purchased 39 $1 million in telecom shares at the end of the quarter, we had over $61 million in net cash on the balance sheet.
Speaker 6: At the end of the quarter, we had over $61 million in net cash on the balance.
Speaker 6: The source of our growth continues to be the disaggregation and decoupling trend, representing one of the most significant transitions of IT architecture in recent history.
The source of our growth continues to be the disaggregation in decoupling Trent representing one of the most significant transitions of architecture in recent history.
Speaker 6: We have been preparing for this trend over the past five years, developing critical technologies and products needed for its success, while building important relationships with hardware and software partners.
We have been preparing for this trend over the past five years developing critical technologies and products needed for each success, while building important relationships with hardware and software partners.
The markets to which these trends play into are the growing SD Wan market and to developing <unk> overall market. The SD Wan market is at the growth phase of its lifecycle and to date contributing tens of billions of dollars to our revenues.
Speaker 6: The markets to which these trends play into are the growing SD-1 market and the developing 5G O-RAN market. The SD-1 market is at the growth phase of its life cycle and today contributing tens of millions of dollars to our revenue.
The <unk> market is still in its early development and introduction phase and once this market will start to move into the growth base. We anticipate it will also begin to contribute significantly to our growth as has been the case with SD Wan.
Speaker 6: The 5G Oran market is still in its early development and introduction phase, and once this market will start to move into the growth phase, we anticipate it will also begin to contribute significantly to our growth, as has been the case with SD-WAN.
We introduced our SD Wan edge products in 2016, and now five years later, we have build a full circle of telcos Oems as well as partnerships and significant collaborations, including AT&T and Intel our partners are divided into two types software and hardware, having Intel is our hardware partner is a big advantage.
Speaker 6: We introduced our SD1 Edge products in 2016, and now, five years later, we've built a full circle of telcos, OEMs, as well as partnerships and significant collaborations, including AT&T and Intel. Our partners are divided into two types, software and hardware. Having Intel as our hardware partner is a big advantage. Intel is the major supplier of x86 CPUs, the main building block of most SD1 platforms.
Vantage Intel is the major supplier of X 86, Cpus. The main building block of most SD Wan platforms. Furthermore, working hand in hand with software partners and validating our systems with various SD Wan application software is crucial in this world of decoupled hardware and software.
Speaker 6: Furthermore, working hand-in-hand with software partners and validating our systems with various SD-WAN application software is crucial in this world of decoupled hardware and software.
These collaborations play a major factor in our success in this market.
Speaker 6: These collaborations play a major factor in our success in this market.
Speaker 6: The success that we see with SD-1 makes us optimistic about our future potential success in other similar markets, like the 5G ORAN market, which are endorsing the disaggregated and decoupling approach.
The success that we see with SD Wan makes us optimistic about our future potential success in other similar markets like the <unk> market, which are endorsing the disaggregated and decoupling approach.
Speaker 6: As we have already achieved with SD1, it is also important for us to build a strong ecosystem of customers and partners in the 5G Oran market. During 2021, we had impressive momentum on this front. In only one year, we have already achieved wins with T1 telcos, service providers, and a leading mobile infrastructure supplier, and we believe this number will grow significantly as Oran enters the mainframe.
As we have already achieved with SD Wan. It is also important for us to build a strong ecosystem of customers and partners in the <unk> market. During 2021, we had impressive momentum on this front in only one year, we have already achieved wins with tier one telcos service providers and a leading mobile infrastructure supplier and we bill.
Earlier, this number will grow significantly as <unk> entered the mainstream.
As such with our partnerships in place and with the additional product and opportunities in the pipeline. We can see the design wins achieved so far are just the tip of the iceberg and looking out over the coming few years <unk> has the potential to add significant traction to the growth of silicone.
Speaker 6: As such, with our partnerships in place and with the additional products and opportunities in the pipeline, we can see the design wins achieved so far are just the tip of the iceberg. And looking out over the coming few years, 5G O-RAN has the potential to add significant traction to the growth of silicon.
Yes.
Speaker 6: Looking back at our business performance in 2021, I would like to elaborate on three major edge design wins achieved in 2021 to stress their significant potential as growth drivers for Silicon.
Looking back at our business performance in 2021, I would like to elaborate on three major edge design wins achieved in 2021 to stress their significant potential as growth drivers for silicon.
The one we announced in May 2021 was with a telco giant telefonica, which plans to start deployment. This year. So the impact of this design win is still ahead of us.
Speaker 6: The one we announced in May 2021 was with a telco giant, Telefonica, which plans to start deployments this year. So the impact of this design win is still ahead.
The second one announced in October 2021 is a design win from a U S based giant which supplies infrastructure equipment too many telcos and service providers globally. This customer is already a very active player in the SD Wan market, whereas supplies, both SD Wan hardware and software the customer selected our SD Wan smart.
Speaker 6: The second one, announced in October 2021, is a design win from a US-based giant, which supplies infrastructure equipment to many telcos and service providers globally. This customer is already a very active player in the SD-WAN market, where it supplies both SD-WAN hardware and software. The customer selected our SD-WAN smart platform for its branded solution, while forecasting a run rate of tens of millions per year in full-ramp hours.
Form for its branded solution, while focusing a run rate of tens of millions per year in full ramp up besides the confirmation it gives to our product and strategy. It also represents a huge future potential as deployments will start this year.
Speaker 6: Besides the confirmation it gives to our product and strategy, it also represents a huge future potential as deployments will start this year.
Finally, I would like to highlight our key design win in November demonstrating the importance of the close relationship as well as the ongoing support and communication that characterize all of our clients are directions, we announced that an existing customer which is a leading north American telco service provider awarded us with a major <unk>.
Speaker 6: Finally, I would like to highlight our key design win in November , demonstrating the importance of the close relationship as well as the ongoing support and communication that characterize all of our clients' interactions. We announced that an existing customer, which is a leading North American telco service provider, awarded us with a major design win with a potential to reach a steady state run rate of $50 million per year for a customized version of our edge smart platform.
<unk> with a potential to reach a steady state run rate of $50 million per year for a customized version of our edge smart platform.
Speaker 6: We announced at the time that the company has placed $30 million in purchase orders for equipment planned to be delivered primarily during the quarantine.
We announced at the time that the company has placed $30 million in purchase orders for equipment planned to be delivered primarily during the current year.
Just a year ago. When we originally started working with this customer each orders of our products where for a relatively standout platforms and we're at a rate of just few million dollars per year.
Speaker 6: Just a year ago, when we originally started working with this customer, its orders of our products were for relatively standard platforms and were at the rate of just a few million dollars per year. But as our relationship developed, we became aware of more and more opportunities, which ultimately led to this major design, one that is approximately 10 times as large as the original.
But as a relationship developed we became aware of more and more opportunities, which ultimately lead to this major design win one that is approximately 10 times as large as the original.
Speaker 6: Beyond this, we believe there is further upside from this customer. And we were discussing additional significant.
Beyond this we believe there is further upside from this customer and we were discussing additional significant opportunities.
Yes.
Specifically with this customer a part of our role is to optimize for components availability given the unpredictable behavior of the component prices and the customers need to deploy the <unk> under a tight schedule.
Speaker 6: specifically with this customer, a part of our role is to optimize for components availability. Given the unpredictable behavior of the component crisis and the customer's need to deploy the platforms under a tight schedule. In fact, we believe that our ability to carefully balance and optimize for availability on the one hand, while supporting the customer with the industry's best connectivity solutions on the other hand, helped us with this deal and our unique advantages of our value proposition.
In fact, we believe that our ability to carefully balance and optimize for availability under onex, while supporting the customer with the industry's best connectivity solutions on the other hand helped us with this deal and our unique advantages of our value proposition.
Speaker 6: More broadly, we continue to see protracted delivery lead times for electronic components as we move into 2022, and this continues to remain a major issue in our industry.
More broadly we continue to see protracted delivery lead times for electronic components as we move into 2022 and it continues to remain a major issue in our industry. Looking ahead, we see this issue remaining with that with us throughout 2022, and possibly even beyond that.
Speaker 6: Looking ahead, we see this issue remaining with us throughout 2022 and possibly even beyond that. However, on the positive side, we've already had much of 2021 to work on mitigating these risks and our achievement of 20% year-over-year revenue growth with 50% operating income growth under these conditions demonstrate that we have done so successfully, which is why we're optimistic for 2022 as well. The steps we've taken in...
However on the positive side, we've already had March of 2021 to work on mitigating these risks in our achievement of 20% year over year revenue growth with 50% operating income growth under these conditions demonstrates that we have done so successfully which is why we are optimistic for 2020 do as well.
The steps, we've taken and continue to take our <unk>.
Leveraging our strong balance sheet to build up our inventory of raw materials carefully backed by customers be ozone commitments buying available stock of components, both from the vendors and in the free market and expediting delivery if need be.
Speaker 6: Leveraging our strong balance sheet to build up our inventory of raw materials carefully backed by customers' POs and commitments, buying available stock of components both from the vendors and in the free market, and expediting delivery if needed.
Two working with customers on optimizing availability and providing them with alternative solutions for example, replacing products the delivery of which is challenging with other products with better availability.
Speaker 6: to working with customers on optimizing availability and providing them with alternative solutions. For example, replacing products, the delivery of which is challenging with other products with better availability.
Three redesigning products to use more available components to achieve optimized availability, obviously when designing new products. Our current initial criteria is optimizing for component availability.
Speaker 6: 3. Redesigning products to use more available components to achieve optimized availability. Obviously, when designing new products, our current initial criteria is optimizing for component availability.
Moving forward, while we predicted the shortages will persist. Despite this given that our experience and success in dealing with the issue combined with a very strong market demand for our connectivity solutions.
Speaker 6: Moving forward, while we predict that the shortages will persist despite it, given that our experience and success in dealing with the issue, combined with a very strong market demand for our connectivity solutions and our broad range and increasingly large design needs, all this supports our expectations for continued solid double-digit growth rates for 2022 and beyond.
And our broad range, an increasingly large design wins all of this supports our expectations for continued solid double digit growth rates for 'twenty to 'twenty to 'twenty two and beyond.
Which brings me to our guidance for 2022.
For the first quarter of 2020 to our actual revenues will be impacted by two opposing forces the dramatic growth in demand for our product on one side and the delivery constraints created by the global components crisis on the other.
Speaker 6: For the first quarter of 2022, our actual revenues will be impacted by two opposing forces. The dramatic growth in demand for our product on one side, and the delivery constraints created by the global components crisis on the other.
Speaker 6: This makes a forecast slightly harder to pin down. So we're being a little more careful and providing a wider guidance range than we normally do.
This makes our forecast slightly harder to pin down so we're being a little more careful and providing a wider guidance range than we normally do.
Speaker 6: With that, for the first quarter, we expect revenues at between $31 million and $33 million, which at the midpoint represent growth of approximately 10 percent over that of the first quarter of 2020.
With that for the first quarter, we expect revenues of between $31 million and $33 million, which at the midpoint represents growth of approximately 10% over that of the first quarter of 2021.
Speaker 6: I would like to note that these growth rates represent our estimates as to the level of our success in indeed mitigating the component situation. Had there been no such situation, our focus would have been much higher.
I would like to note that these growth rates represent our estimates as to the level of our success and indeed mitigating the component situations that there be no such situation our focus would have been much higher.
In summary, we see silicon, having now crossed a new growth inflection point and we believe that silicon will see double digit compounded revenue growth for the coming few use.
Speaker 6: In summary, we see Silicon having now crossed a new growth inflection point and we believe that Silicon will see double-digit compounded revenue growth for the coming few years.
Our expectations are built on the recent major design wins, the scale of which is well ahead of what we have traditionally experienced and provides us with strong revenue visibility over many quarters and even use as we move into 2020 do we already see a sustained long term revenue growth path with further up.
Speaker 6: Our expectations are built on the recent major design wins, the scale of which is well ahead of what we have traditionally experienced, and provides us with strong revenue visibility over many quarters and even years. As we move into 2022, we already see a sustained long-term revenue growth path with further upside potential as we continue to successfully cement and broaden our relationship with some of the world's largest companies.
<unk> potential as we continued to successfully cement and broaden our relationship with some of the world's largest companies.
More broadly our long and growing list of design wins generating ongoing orders, our solid baseline of activities and strong market fundamentals with our focus on some of the fastest growing markets in the networking space as well as our current long and deep pipeline makes us increasingly optimistic as time passes.
Yes.
Speaker 6: With that, I will now hand over the call to Eran for a detailed review of the quarter's results. Eran, please go ahead.
With that I will now hand over the call to Iran. For a detailed review of the quarter's results around please go ahead.
Thank you <unk> and Hello, everyone.
Speaker 7: Revenues for the fourth quarter of 2021 were $36.3 million, compared with revenues of $33.9 million, as reported in the fourth quarter of last.
Revenues for the fourth quarter of 2021.
Were $36 $3 million compared with revenues of $33 $9 million as reported in the fourth quarter of last year and $32 $9 million as reported in the prior quarter.
Speaker 7: and $32.9 million as reported in the prior quarter.
Our geographical revenue breakdown over the last 12 months were as follows North America, 69%, Europe , and Israel, 23% far east and rest of the world 8%.
Speaker 7: Our geographical revenue breakdown over the last 12 months were as follows. North America 69%, Europe and Israel 23%, Far East and rest of the world 8%.
During the last 12 months, our top three customers together accounted for about 30% of our revenues.
Speaker 7: During the last 12 months, our top three customers together accounted for about 30% of our revenue.
I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the noncash compensation expenses in respect of options and there are skus granted to directors officers and employees.
Speaker 7: I will be presenting the rest of the financial results on a non-GIP basis.
Speaker 7: includes the non-cash compensation expenses in respect of options and RCUs granted to directors, officers, and employees, acquisition-related adjustments, lease liabilities, financial expenses, as well as impairment of intangible assets.
Acquisition related adjustments.
Liabilities financial expenses as well as impairment of intangible assets.
For the full reconciliation from GAAP to non-GAAP numbers. Please refer to the press release, we issued earlier today.
Speaker 7: For the full reconciliation from GAP to non-GAP numbers, please refer to the press release we issued earlier today.
Gross profit for the fourth quarter of 2021.
Speaker 7: Gross profit for the fourth quarter of 2021 was $12.7 million, representing a gross margin of 34.9% in the upper part of the range of our gross margin guidance of 32 to 36%.
$12 $7 million, representing a gross margin of 34, 9% in the outer part of the range of our gross margin guidance of 32% to 36% and compared to a gross proceeds of $11 $4 million.
Speaker 7: compared to a gross profit of $11.4 million or gross margin of 33.6% in the fourth quarter of 2020.
Gross margin of 33, 6% in the fourth quarter of 2020.
The variance in the gross margin is a function of the specific product mix sold in the quarter.
Speaker 7: The variance in the gross margin is a function of the specific product mix, so...
Operating expenses in the fourth quarter of 2021 were $7 5 million similar to the $7 4 million reported in the first quarter of 2020.
Speaker 7: Operating expenses in the fourth quarter of 2021 were $7.5 million, similar to the $7.5 million reported in the first quarter of 2021.
Speaker 7: Operating income for the fourth quarter of 2021 was $5.1 million, an increase of 31% compared to operating income of $3.9 million as reported in the fourth quarter of 2020.
Operating income for the fourth quarter of 2021 was $5 $1 million, an increase of 31% compared to operating income of $3 9 million as reported in the fourth quarter of 2020.
Net income for the quarter was $4 $5 million, an increase of 14% compared to $4 million in the fourth quarter of 2020.
Speaker 7: Net income for the quarter was $4.5 million, an increase of 14% compared to $4 million in the fourth quarter of 2020.
Earnings per diluted share in the quarter was 65.
Speaker 7: Earnings per diluted share in the quarter were $65,000.
Speaker 7: This is a year-over-year increase of 16% compared with EPS of $0.56, as reported in the fourth quarter of last year.
This is a year over year increase of 16% compared with EPS of <unk> 56.
Bolted in the fourth quarter of last year.
Now turning to the balance sheet.
Speaker 7: Now, turning to the balance sheet, as of December 31st, 2021.
Timber 31st 2021.
The companys cash cash equivalence and marketable securities totaled $61 $3 million with no debt or $9.14 per outstanding share.
Speaker 7: The company's cash equivalents and marketable securities totaled $61.3 million with no debt or $9.14 per outstanding share.
Speaker 7: During the quarter, we further executed on our third $15 million share buyback plan, which we started on May 4th.
During the quarter further executed on our search $15 million share buyback plan, which we started on may 4th 2021.
Speaker 7: During the fourth quarter, we purchased approximately 81,000 shares at a total cost of $3.6 million.
During the fourth quarter, we purchased approximately 81000 shares at a toll.
It'll cost of three 6 million tons.
That ends my summary.
Speaker 7: I would like to hand back over to the operator for question and answer session.
I would like to hand back over to the operator for question and answer session.
A writer.
Speaker 4: Thank you. Ladies and gentlemen, at this time we 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. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your question.
Thank you ladies and gentlemen at this time I'll begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two.
You are using speaker equipment.
Handset before pressing the numbers questions will be pulled in the order. They are received please stand by while we poll for your questions.
The first question is from Alex Henderson Needham <unk> Company. Please go ahead.
Speaker 4: First question is from Alex Henderson of Needham & Company. Please go ahead.
Hi, Alex.
Speaker 8: Thank you very much, and you guys are really executing superbly against a toughened backdrop. I wanted to talk a little bit about the gross margin risk associated with component costs and how you're mitigating it.
Thank you very much.
That is on mute.
Taking it all.
Thank you very much guys.
Yeah, really executing superbly against that backdrop I wanted to talk a little bit about that.
Gross margin risk associated with them.
Component cost.
And mitigating it.
Speaker 8: doing such a great job on it, obviously, to the extent that you're doing something a little different, I think, than most other companies. I think you guys have partnered with
Such a great job on it obviously.
To the extent that the.
You're doing something a little different I think than most other companies.
We partnered with them.
Speaker 8: your customers giving them the option to help you buy these components and not running that incremental cost through your income statement or in terms of either revenue or margin impact. Can you talk a little bit about what you're doing there?
Yeah.
Yeah customers, so giving them the option to.
To help you buy these components.
Running that incremental cost through your income statement.
In terms of either revenue or margin impact can you talk a little bit about what you're doing there.
Yeah, I mean, there are several parts to that.
Speaker 6: Yeah, I mean, there are several parts to that. First of all, indeed, we have a very close relationship with all of our customers. And that means that we're discussing this issue openly with them and very transparently with them.
The first of all indeed, we have very close relationship with.
All of our customers and that means that we're discussing this issue openly with them and very transparently with them.
Speaker 6: And yes, you're right. I mean, because we are transparent with them and they are aware, of course, of the situation.
And.
Yes, Youre right I mean, because we are transparent with them.
And they are aware of course of the situation. So in most cases.
Speaker 6: So, in most cases, we're able, first of all...
We're able first of all to make sure that the customer is actually undertaking the additional cost when it's significant I mean, there are many cases, where we are helping our customers and then we are absorbing some of that but when the extra costs are significant our customers are coming into that and there are helping into that.
Speaker 6: to make sure that the customer is actually undertaking the additional cost when it's significant. I mean, there are many cases where we are helping our customers.
Speaker 6: And then we are absorbing some of that, but when the extra costs are significant.
Speaker 6: Our customers are coming into that and they're helping into that.
Now, yes, you're right I mean, we're not increasing our revenue was due to that I mean, even though they are helping us we're not using this increase to increase our revenues artificially by doing that and either they are buying that or.
Speaker 6: Now, yes, you're right. I mean, we're not increasing our revenues due to that. I mean, even though they're helping us, we're not using this increase to increase our revenues.
Speaker 6: artificially by doing that and either they're buying that or we're finding a way that would just I would say
We're finding a way that would just I would say.
Speaker 6: taking that out of the revenues and the expenses because they're paying for that directly or any other mechanism like that. So I would say that overall the
Taking that out of the revenues and the expenses because they are paying for that directly or any other mechanism like that so I would say that overall the increased costs.
Speaker 6: does have a certain impact on our cost, and it should actually reduce our margins. But because of the mix of products, et cetera, you don't see that because we're doing that. This is happening only where the increase in cost is really minimal. When it's more than that, we're working on that together with our customers.
<unk> have it shouldnt impact our cost and it should actually reduce our margins, but because of the mix of products et cetera, you don't see that because we are doing that this is happening only where the increase in cost is right is really minimal when it's more than that we're working on that together with our.
<unk>.
Okay.
That's very helpful. Thanks.
One of the companies that we follow.
Speaker 8: One of the companies that we follow, F5 Networks, reported the other night, and they specifically called out a significant erosion in the availability of parts with a 35% jump month to month in decommits.
Networks are reported.
The night and theirs.
You called out a significant erosion.
In the availability of parts.
35% month to month.
<unk> and then went on to say that they had been buying some components in the spot market.
Speaker 8: and then went on to say that they had been buying some components in the spot market and quote, spot market is completely dried up. You can't get anything. There's just nothing to be had. Have you seen any change in the supply chain availability of the components that are critical to your product or any other change in the environment over the last month?
Quote spot market has completely dried up you can't get anything because there's nothing to be had.
Have you seen any change in the supply chain availability of the components that are critical to your product.
Or or or any other change in the environment over the last months.
But I wouldn't be able to say that we've seen a change the situation is still extremely challenging the one thing that I would be able to say is that we are more familiar with what's going on and were getting ourselves prepared possibly in a better way and that would include all the means that I that I was talking about when I was.
Speaker 6: Well, I wouldn't be able to say that we've seen a change. The situation is still extremely challenging.
Speaker 6: The one thing that I would be able to say is that we are more familiar with what's going on and we're getting ourselves prepared, possibly in a better way. And that would include all the means that I was talking about when I was talking about that before.
Talking about that before.
Speaker 6: So as I've said, we don't see any improvement in the situation. We also experienced the commit.
So.
As I've said, we don't see any improvement in the situation. We also experienced that commits.
Speaker 6: crazy lead times, and so on and so forth. But, I mean, we're used to that right now. We're beginning to look at replacement components earlier. We're doing redesigns earlier, but because the demand is growing as well, so we have more to deal with, which is why the overall situation is still challenging, but on the other side, we are optimistic because this is now the day-to-day work that we're doing these days.
Crazy lead times, and so on and so forth, but I mean, we're used to that right. Now we are beginning to look at replacement components earlier, we're doing redesigned earlier.
But because the demand is growing as well so we have more to deal with which is why the overall situation is still challenging but on the other side, we are optimistic because we're.
This is now the day to day work that we're doing these days.
Okay.
Yeah.
Timeline of ramping these large contracts that you've gotten has.
Speaker 8: timeline of ramping these large contracts that you've gotten, has there been any slippage or any pull forward or any change in the magnitude that you're expecting, you know,
Okay.
Or any pull forward or any change in the magnitude that you're expecting.
Speaker 8: in terms of the available demand in 2022.
In terms of all available demand in 2022.
I mean, we are on track with these projects.
Speaker 6: I mean, we are on track with these projects, but it took some decisions that we had to make together with the customer along the way. I mean, we could have had to change a certain element of the specification in order to do something a little bit different, which is, once again, this is what we're doing in order to overcome all these challenges. But right now, we're on track with the major product.
But it took some decisions that we had to make together with the customer along the way I mean, we could have had.
Head too.
<unk> change a certain element of the specific patient in order to do something a little bit different which is once again. This is what we're doing in order to overcome these challenges.
But right now we're on track with a major product.
Major wins below.
Speaker 8: Below the line, there's a couple of things that were a little different than what we'd expected, assuming we plugged these correctly, but the interest income took a little bit of a dive, and seeing that at $193,000 cost as opposed to an income, which is normally what you see in that line.
Below the line there is a couple of things that were a little different than what we'd expected assuming we plug. These currently but the interest income.
You took a took a little bit of a diovan seem that at $193000 cost as opposed to an income which is normally what you see in that line.
Speaker 8: Can you tell us, A, what happened in there, and B, whether that should go back to an income in the March quarter?
Can you tell us what's happening there and b, whether that should go back to the NIM.
The March quarter.
Ken can you repeat please your question financial income.
Speaker 8: On the financial income line, we're showing a $193,000 cost. We had expected a slight income, and it's normally an income. It looks like it's spiked down somewhat. Can you talk about whether you expect that to go back to an income in the first half of 2022?
On the financial income line.
We're showing a $193000 cost we had expected a slight income.
And it's normally an income.
It looks like it spiked.
Can you talk about whether you expect that to go back to an income in the first half of <unk>.
Two.
Speaker 7: Yes, I can. First of all, in quarter four, 2021, there was a negative effect of exchange rate differences.
Yes, I can first of all.
For 2021, there was a negative effect of exchange rate differences.
In the amount of approximately $300000.
Speaker 7: Approximately three hundred thousand dollars
Yeah.
Which means that there.
That brought us from slight positive income to two losses.
Speaker 7: That brought us from a slight positive income to...
Hey.
Speaker 7: It is very hard to predict what will be in the future. Exchange rate differences may be a big factor in the financial income number. It is hard to predict right now. Without effects of exchange rate differences, we should have...
It is very hard to predict what will be in the future exchange rate differences may be a big factor in the financial income number.
It does it is hard to predict right now.
Result effects of exchange rate differences, we should have.
And.
Speaker 7: an income of approximately $100,000 to $150,000. With the effect of exchange rate differences,
And income for approximately 101 other than $50000 with the effect of exchange rate differences.
We simply cannot know.
Yes understand.
Speaker 8: I understand. And then the tax rate also came in lower than normal. What tax rate should we be using for 22? I assume it's around 15%. Is that the right mechanic?
The tax rate also came in lower than normal should put taxes should we be using for <unk>.
22, I assume it's around 15% is that the right mechanics.
Yes, indeed, the effective tax rate in quarter, four was lower than usual.
Speaker 7: Yes, indeed the effective tax rate in quarter 4 was lower than usual. This is due to very specific reasons for the quarter. I keep saying that the effective tax rate should be around 15%. A little bit more, a little bit less.
This is due to very specific reasons for the quarter.
I keep saying.
Okay.
The effective tax rate should be around 15%, a little bit more a little bit unclear, but still in the range of 16%.
Okay.
Yeah.
The.
Speaker 8: The costs a lot of companies are seeing around wage inflation and staffing churn.
Costs a lot of companies are seeing.
Wage inflation and staffing churn.
Has escalated the opex costs at a lot of companies you guys seem to be.
Speaker 8: have escalated the OpEx costs at a lot of companies. You guys seem to be.
Speaker 8: able to mitigate that a lot more than most. Have you seen any impact on churn that's increased versus, say, the 2019 staffing churn rates? And have you seen any change in wage inflation? My assumption is that you guys are able to hold on to people better than most companies because you have such a long tenure.
Are you able to mitigate that a lot more than most.
Have you seen any impact on churn.
Increased versus say the 2019 staffing churn rates.
Have you seen any change in wage inflation.
My assumption is that you guys are you able to hold onto two people better than most companies because you have such a long tenure.
With the employees.
Speaker 8: group of employees, but can you give us any thoughts on churn of staffing and wage employment?
Can you give us any thoughts on churn.
And wage inflation.
Yeah, well I think youre right I mean, we are.
Speaker 6: Yeah, well, I think you're right. I mean, we are able I, I would say to have a quite high retention rate of our employees. And I believe that this is because we have the reputation of a stable company.
Abel I I would say to have a quite high retention rate of our employees and I believe that this is because we have the reputation.
Stable company.
Speaker 6: which holds and protects its employees, not only in good times, but also in bad times.
Which hodes and protect its employees not only in good times, but also in bad times and I believe that this is why.
Speaker 6: And I believe that this is why people are staying with our company probably for longer than what they do with other companies.
People are staying with the with our company probably for longer than than what they do with other companies that being said I would say that yes, I mean, we're aware of.
Speaker 6: That being said, I would say that, yes, I mean, we're aware of what's going on. I mean, for example, getting new employees is becoming more difficult.
What's going on I mean for example of getting new employees is becoming more difficult and you.
Speaker 6: And you need to pay more on the one hand, while on the other hand, you don't want to do that because you do not want to change the structure of the current.
You need to pay more on the one hand bar while on the other hand, you don't want to you don't want to do that because you do not want to change the structure of the current.
Speaker 6: the wages that we're paying within the company. So I would say that overall, this is one of our challenges these days. But I would say also that it's a managed challenge and we are able to.
Wages were.
Paying within the company. So I would say that overall this is one of the one of our challenges. These days, but I would say also that it's a managed challenge and we are able to.
Eventually.
Speaker 6: eventually, hire the people that we need or find ways to sometimes outsource or whatever, manage it in the right way so that the impact, the overall impact on OPEX, while I wouldn't say that it's zero, but we keep it to a minimum.
<unk> hired the people that we need and or find ways to.
The sometimes outsource or whatever manage it in the right way so that the impact the overall impact on Opex, while I wouldn't say that it's zero, but we keep it to a minimum.
On top of that I would like to add that in quarter four.
In the quarters before quarter four there was a negative.
Effects of exchange rate, yes, that's for sure.
<unk> effect in <unk>.
Quarter four due to the.
Shekel in the Danish Crone was about negative effect was about $150000.
The exchange rate on December 31st.
The last day of the year was really was really low.
Speaker 7: The last day of the year was really low, and as I said, a negative effect of about 100
And as I said, a negative effect of about 150.
Speaker 8: All right. The good news is that it's come back in since then, so hopefully that'll help you going forward. In terms of the, you know, the pipeline of new opportunities beyond what you've already announced, it sounds like you've got roughly six major
Alright very good.
News is that it's come back since then so.
Hopefully that will help you going forward.
In terms of.
The pipeline of new opportunities beyond what you've already announced.
It sounds like you've got roughly six major.
Speaker 6: Contract wins that are in one form or another position to ramp that are very significant revenue What's the rest of the pipeline look like for additional opportunities? Yeah, we also have a very thick and long pipeline for additional opportunities We have several of these some
Contract wins that are in one form or another position to ramp that are very sticky revenue, what's the rest of the pipeline looks like for additional opportunities.
We also have a very thick and loan pipeline for additional opportunities.
We have several of these.
Some of which are also very big so yes, it's not only those that we've announced already we definitely have a longer pipeline.
Speaker 6: So yes, it's not only those that we've announced already, we definitely have a long and thick pipeline. Most of it is within, is opportunities for the edge, but also for the smart mix, especially the 5G accelerators. We're having more customers waiting for us. We're now designing the next generation of that card. So hopefully, not hopefully, I mean, we do have quite a significant pipeline in that space.
Cost of debt is within is opportunities for the edge, but also for the smart mix, especially the <unk> accelerators.
We're having more customers waiting for US we are now designing the next generation of that card so hopefully.
Not hopefully I mean, we do have.
Right, a significant pipeline in that space as well.
One last question, then I'll cede the floor.
Speaker 8: One last question, then I'll cede the floor. 5G open RAN opportunities, can you just talk a little bit more about where you are relative to winning those and when you think those might run?
Ultra marine opportunities can you just talk a little bit more about where you are relative to.
To winning those when you think those might ramp.
Well I mean in <unk> there are several things for us in which we're involved first of all as as I said I mean, we are already selling and that was one of our growth factors in 2021, even we're selling a <unk> accelerator, which works within Ora and we're selling.
Speaker 6: Well, I mean, in 5G, there are several things for us in which we're involved. First of all, as...
Speaker 6: As I said, I mean, we are already selling. And that was one of our growth factors in 2021. Even we're selling a 5G accelerator, which works within ORM.
Speaker 6: And we're selling that to a major telco.
That too.
The major telco and a major service provider and we have another win.
Speaker 6: and a major service provider, and we have another win with a major equipment provider which has not started to ramp up yet.
With a major equipment provider, which has not started to ramp up yet so and there are several customers around the corner, which are a part of that pipeline. So for this solution.
Speaker 6: So, and there are several customers around the corner, which are a part of that pipeline. So for this solution, oh, it's actually, it's not even a solution. It's a family of solutions because there's several form factors, several generations, several flavors of this solution.
Actually it's not even a solution is a family of solutions because there are several form factors. Several generations. Several flavors of this solution. This is I would say something that we're already selling but we need to remember that <unk> is only in its I would say early deployment. So.
Speaker 6: This is, I would say, something that we're already selling, but we need to remember that 5G and O-RAN is only in its, I would say, early deployments. So even with this family as it is, we believe it would grow quite significantly even in this year, and then later on. Now, on top of that.
Even with this family as it is we believe it will grow.
Quite significantly even in this year and then later on.
Top of that we.
We are investing in another card, which is the types of colonization cart and discard is.
Speaker 6: We are investing in another card, which is a time synchronization card. And this card is.
Speaker 6: already in, I would say, in evaluations by many of the world's leading companies, which would include OEMs, it would include telcos, and hopefully we would be successful with that one. The quantities would be similar to the quantities of the accelerator that I was talking before, only this card is much more expensive, so in terms of revenues and profits it would be much more significant.
Already in <unk>.
I would say in evaluations by many of the worlds leading compass.
Companies, which would include Oems. It would include a telcos and.
Hopefully we would be successful with that when the quantities will be similar to the quantities of the accelerator that I was talking before only discard is much more expensive. So in terms of revenues and profit it would be much more significant and then following that we also have additional.
Speaker 6: And then following that, we also have additional smart cards, I would say, which address a combination of the requirements for 5G. And they are also a part of our pipeline. So overall, we see 5G and O-RAN.
Smart cards, I would say, which address a combination of the requirements for <unk> and there are also a part of our.
Our pipeline so overall, we see a.
IGN overrun.
Hi.
As something which is very important to us.
But even if <unk> does not happen.
Speaker 6: But even if 5G does not happen.
Speaker 5: then just with the edge, I mean, still, edge is going to be our major growth driver. And even if 5G, even if there is no growth at all with 5G, we would still be able to demonstrate double-digit growth.
Then just with the edge I mean still edge is going to be our major.
A growth driver and even if.
Even if there is no growth at all with <unk>.
Would still we would still be able to demonstrate double digit growth.
Speaker 6: for this year and following year, once again, I mean, assuming that we would be able to handle the component crisis.
For this year and following year once again, assuming that we would be able to handle the component prices just like we have been able to do that this year. So five G and everything that comes with it would be on top of that.
Speaker 6: just like we have been able to do that this year. So 5G and everything that comes with it would be on top of that.
One last.
Speaker 8: Clarification, just to want to make sure that I'm correct, I think we had thought when you printed last quarter that you had five major contract wins so far in CY21, and that now there's an additional one that came in in the fourth quarter, so we're now at six. Can you clarify whether that's correct?
Clarification, just want to make sure that I'm correct.
We had.
Paul.
When you printed last quarter that you had five major contract wins.
So far in <unk> 'twenty one now.
Additional one that came in in the fourth quarters here. We're now at six is that right.
Can you clarify whether that's the right.
Speaker 6: A little bit difficult for me to say because there is a difference in the level of I would say importance and I don't know exactly which of the five, obviously we have many more than just five minutes.
Number.
It's difficult to say because there is a difference in the level of I would say importance and I don't know exactly which of the five obviously, we have many more than just five minutes and.
Speaker 6: And so I'm not, you may have done the calculation and the counting of the wins more than I did, so I'm not sure I can tell you exactly the number, but I would say that yeah, I mean we have definitely five or maybe six, I mean I don't know, really important customers.
So I am not.
You may have done the calculation and the accounting of the <unk>.
More than I did so I'm not sure I can tell you exactly the number but I would say that yes, I mean, we have definitely five or maybe six I mean, I don't know really important customers.
But yeah.
Yes.
I would like to go with you on that I would just like to add that some of the others, maybe a little bit less important but you know it's enough because of the relationship that we're having with them. We could just we are working with all of them on additional banks, though the next quarter or one of these.
Speaker 6: I would like to go with you on that, I would just like to add that some of the others may be a little bit less important, but you know, it's enough because of the relationship that we're having with them. We could just, we are working with all of them on additional things, so the next quarter one of these...
Speaker 6: The seventh one could become suddenly one of the top three or something like that due to another week. So that could happen as well.
The seventh one could become suddenly one of the top three or something like that due to another week, so that could happen as well.
Super I'll cede the floor. Thank you very much.
There are any additional questions. Please press star one if you wish to cancel your request. Please press star two please stand by while we poll for all our questions.
Speaker 4: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please.
There are no further questions at this time before I ask Mr. Orbach 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 telecoms website, www dot silicon Dash USA Dot com SRO Orbach would you like to make your concluding statement, yes, I'll try to actually.
Speaker 4: There are no further questions at this time. Before I ask Mr. Orbach to go ahead with his closing
Speaker 4: I would like to remind participants that a replay of this call will be available by tomorrow on Silicon's website, www.silicon-usa.gov.
Speaker 5: Mr. Orbach, would you like to make your concluding statement? Yes. Operator, we actually have a follow-up question from Alex if you want to take it.
Have a follow up question from Alex.
Do you want to take it.
Yeah sure happy to.
Can you hear me Alex Please go ahead.
Yes, sorry.
Speaker 8: Yeah, I'm sorry, I was thinking that there would be somebody else in the lineup, so I wanted to be respectful, but if there's nobody else asking questions, I've got a couple more that I'd like to address.
We're sticking to somebody else in the lineup. So I wanted to be respectful, but theres nobody else asking questions.
Got a couple more that I'd like to address.
Speaker 8: Can you talk a little bit about any competitive issues or any change in the competitive landscape? Have you seen...
Can you talk a little bit about any competitive issues or any change in the <unk>.
<unk> landscape have you seen.
Speaker 8: You know, anybody emerging as an alternative to you in some of these major projects that you're driving towards or are you still, you know, kind of unique?
Anybody emerging as an alternative to you in some of these major projects that you're.
Driving towards or are you still kind of <unk>.
Uniquely positioned.
Well, let me divide my response to that to the various <unk>.
Speaker 9: Well, let me divide my response to that to the various markets that we're addressing and specifically the growing markets or the main growing markets for us. So first of all about the edge, so we don't see any new competitors in the edge market.
Markets that we're addressing specifically the growing market.
The main growing markets for us so first of all about the edge. So we don't see any new.
The competitors in the edge space.
Speaker 6: I think actually that one of the reasons as to why we're very successful on the edge
I think actually that's one of the reasons as to why we were very successful in the edge is simply because it's been a process of several years for us because as you know I mean, we have entered the edge space, just about six years ago or something like that.
Speaker 9: is simply because it's been a process of several years for us because, as you know, I mean, we have entered the edge space just about six years ago or something like that.
And it takes some time for the I would say the edge community and for us to get to the status that we have been able to achieve in our OEM market that we serviced.
Speaker 9: And it takes some time for the, I would say the edge community and for us.
Speaker 9: to get to the status that we have been able to achieve in our OEM market that we serviced not only before but in parallel with that. And I think that they know us by now, they respect the technology, the solutions, so I simply believe that our competitive position compared to the same competitors
Not only before but in parallel with that and I think that they know us by now they respect that technology solutions. So I simply believe that our competitive position compared to the same competitors has improved significantly which is why we are winning more and more now that comes of course together.
Speaker 9: has improved significantly, which is why we're winning more and more.
Speaker 6: Now that comes, of course, together with the fact that the market is growing, but I think that it's a combination of the two. The market is growing. I think, I believe that our market share is growing.
With the fact that the market is growing but I think that it's a combination of the two the market is growing.
Think I believe that our market share is growing.
Speaker 9: Whoever or the potential customers are familiar with us, know us, and I think that this is helping us. So in that case, I believe that our competitive situation is
However, all the potential customers are familiar with us know us and I think that this is helping us so in that case I believe that our competitive situation.
Is improving.
Speaker 9: Now, let me go and talk about the 5G and Oran. In 5G, I would say that the situation is, in a way, the other way around. In the ad space, we were, I would say, coming the latest to the market because we were addressing a market that was serviced before by our competition.
Now I would like to go and talk about the about five G and Ora in <unk> I would say that the situation is is in a way the other way around.
The AD space, we were I would say coming the latest to the market because we were addressing a market that was serviced before by our by our competition.
Speaker 9: In the O-RAN accelerators, both the accelerator and the time synchronization were actually leading the market. Now we do see competition around that, but the competition is not yet where we are. So right now we are, I would say, it's practically only us in the market and it's
<unk> or in accelerators, both the accelerator and the Tantric organization, we're actually leading the market now we do see competition around that so but the competition is not yet where we are so right. Now we are I would say, it's practically only asking the market and it's a.
Yeah.
I would say, it's relatively to get wins to whoever is really meeting the card, but on the other side I mean the market is.
Speaker 9: I would say it's relatively to get wins to whoever is really needing the cards. But on the other side, I mean, the market is still in early stages.
Is still in early stages. So the overall market size is not is not big now the market will begin to grow I think we would be the leader in the market. We will continue to be the leader in the market, but the competition will grow as well. So overall my prediction is that our revenues from that market will grow significantly.
Speaker 9: So the overall market size is not big. Now the market will begin to grow. I think we would be the leader in the market. We will continue to be the leader in the market, but the competition will grow as well. So overall, my prediction is that our revenues from that market will grow significantly, but so will the competitions because we cannot win that all.
But so will the competition because we've got wind at all.
There was a magic one that we were able to wave over the industry and supply chains.
Speaker 8: If there was a magic wand that we were able to wave over the industry and supply chains were completely normalized,
We're completely normalized.
Right.
Speaker 8: would you be producing twenty to thirty percent revenue growth or more
Would you be producing 20% to 30% revenue growth or more.
Yes.
And.
I mean can you kind of quantify the.
Speaker 9: I mean, can you kind of quantify how much of the growth you're, I mean, we're modeling like 15%. Yeah, I mean, I don't know exactly, but 20% or 30% or more. So you can delete the 20%.
How much of the growth year.
We're modeling like 15% I mean, I don't know exactly but you asked 90% or 30% or more so you can delete the 20%.
Okay.
Speaker 8: Okay, and going back to the gross margin side of it, obviously these larger contracts.
And going back to the gross margin side of it.
Some of these larger contracts.
Do represent much higher volumes higher volumes are great for driving revenue, but they are often come with some margin compression.
Speaker 8: you know, do represent much higher volumes. Higher volumes are great for driving revenue, but they also often come with some margin compression. As we look at the gross margin outlook based on the current environment that you see and the constraints that you see, is it reasonable to think that, you know, the gross margins will be comparable to?
We look at the gross margin outlook based on the current environment that you see and the constraints that you see.
So is it reasonable to think that.
The gross margins will be comparable too.
No.
Speaker 8: you know, or just slightly lower than where you are today. I know you've got a very wide band out there.
Or just slightly lower than where you are today.
I know you've got a very wide band out there.
Speaker 8: That band is a little wider than I'd like to forecast to. So can you talk a little bit about what you think is going to happen on GM?
The band is a little wider than I'd like to forecast too. So can you talk a little bit about what you think is going to happen on gms.
Speaker 9: Yeah, I mean, I think that it's going to be a little bit difficult for me to narrow down.
Yes, I mean I think.
But it's going to be a little bit difficult for me to narrow down.
Speaker 10: I would say that
And I would say that.
The limit or.
Outlook that we've provided until now which was.
Margins between 32, and 36% and Thats because there are many factors, which are impacting that so under one side the margins that we sell.
Speaker 6: Especially when the contracts, just like you said, are becoming bigger and bigger, the margins are going down to a certain extent, but as we grow, we are able to become more efficient. Some of our, I would say, fixed expenses, which are a part of the margins calculation, are getting lower, so are improving to a certain extent. And also, obviously, there is always the mix, the product mix that we're talking about.
The.
Especially when their contracts just like you've said are becoming bigger and bigger the margins are going down to a certain extent, but as we grow.
We are able to become more efficient some of our I would say fixed expenses, which are a part of the margin calculation are getting lower so our improving to a certain extent and also obviously there is always the mix the product mix that we're talking about so I think that for.
Speaker 9: So I think that for 2022, I can only say that it's still going to be between 32 and 36, and I would not be able to guess within that range where exactly we're going to be.
2022.
We I can only say that it's still going to be between 32, and 36 and I would not be able to get within that range, where exactly we're going to be.
If he gets it say, 34% for the two years is that reasonable.
Speaker 8: If we guess at, say, 34% for the two years, is that a reasonable... I think that's reasonable.
I think that as rates start.
And then on the Opex side.
Speaker 6: And then on the OPEX side, obviously the Sheckle pressured your OPEX last year quite a bit. The Sheckle now stabilizing a little bit more, particularly of late. Are we talking about 5% to 10% growth in OPEX against, say, a 15% revenue growth rate? Is that kind of the right way to think about it? I think, yeah, I think the OPEX will be a little higher.
The shekel pressured your opex last year quite a bit.
Shekel now stabilizing a little bit more.
Particularly.
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Are we talking about 5% to 10% growth in Opex against say, a 15% revenue growth rate is that kind of the right. When you think about it I think yes, I think the opex will be at.
A little higher.
Speaker 6: more or less in the in the areas that you have mentioned. Yeah, I mean I don't...
More or less in the in.
In the areas that you have mentioned.
Yes, I mean, I don't believe it will be 10% higher but.
Yes.
Yes.
Well I think that.
Speaker 8: I've exhausted those questions. The only last one would be on the balance sheet side, do you think you will generate net cash over the course of the year, recognizing that you're still doing buyback?
As it wants to do those questions. The only one and would be on the balance sheet side do you think.
Generally net cash.
Course of the year.
Recognizing that you're still doing buybacks.
Well.
Speaker 6: Well, I think that the ability to generate cash really is very much dependent on the status of the components crisis.
I think that the one <unk>.
<unk> to generate cash really is very much dependent on the status of the components crisis.
Speaker 6: And I think that due to the components crisis, as long as it grows, we're buying, we're increasing our stock, we are increasing our revenues. So we want to be prepared for that. And unlike, I would say, regular times, we're not just buying.
And I think that due to the components crisis as long as it grows we're buying we're increasing our stock we are increasing our revenues. So we want to be prepared for that and unlike I would say regular time. So we're not just buying.
Speaker 6: under the theme of just-in-time, because many vendors decommit. So whenever we feel pretty confident about the revenues which are coming, we're buying everything. So we're increasing inventory quite significantly, and that's obviously something which is difficult from a cash-generation perspective. But I would say that once this crisis is over,
Under the theme of just in time, because many vendors decommit, so whenever we feel pretty confident about.
Revenues, which are coming we're buying everything so we're increasing inventory quite significantly and thats, obviously, something which is difficult from a cash generation perspective, but I would say that once this crisis is over and as I'm really confident about our growth and a continuation.
Speaker 6: And as I'm really confident about our growth and the continuation of such growth, that would be the time that we would definitely come again to generate cash, even when we go ahead with the buybacks.
<unk> of such growth that would be the time that we would definitely.
Come again to generate cash even when we go ahead with the buyback.
Thanks.
Mr. Orbach would you like to make your concluding statement.
Thank you operator, thank you everybody for joining the call and we wish you all health and we look forward to hosting you on our next call in three months time good day.
Speaker 9: Yeah, thank you, operator. Thank you, everybody, for joining the call. We wish you all health and we look forward to hosting you in our next call in three months time. Good day.
Thank you. This concludes silicon fourth quarter 2021 results conference call. Thank you for your participation you May go ahead and disconnect.
Speaker 4: Thank you. This concludes Silicon's fourth quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.
Okay.
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