Q1 2025 Silicom Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by.
Ladies and gentlemen, thank you for standing by welcome to the Silicon first quarter 2025 results Conference call. All participants are present in listen only mode. Following management's formal presentation instructions will be given for the question and answer session. As a reminder, this conference is being recorded.
Operator: Welcome to the Silicom First Quarter 2025 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session.
Operator: As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Silicom's Investor Relations team at EKGlobalInvestorRelations at 1-212-378-8040 or view it in the news section of the company's website.
Should have all received by now the Companys press release, if you have not received it please contact silicon <unk> Investor Relations team at U K Global Investor Relations at one to one to 3788040 or view it in the news section of the company's website.
Kenny Green: www.silicom-usa.com I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations Mr. Green, would you like to begin please? Thank you, operator.
Www dot silicon Dash USA dot com.
Speaker Change: I'd now like to hand over the call to Mr. Kenny Green of Ek Global Investor Relations. Mr. Green would you like to begin. Please. Thank you operator I would like to welcome all of you to telecoms quarterly results conference call before we start I would like to draw your attention to the following safe Harbor statement.
Kenny Green: I would like to welcome all of you to Silicom's quarterly results conference call.
Kenny Green: Before we start, I would like to draw your attention to the following Safe Harvest statements. This conference call contains forward-looking statements. Such statements may include, but are not limited to, anticipated future financial and operating results and Silicom's outlook and prospects. Those statements are based on management's current beliefs, expectations, and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic, and other factors and conditions, and are subject to known and unknown risks and uncertainties and factors, many of which are outside of Silicom's control, which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statement.
This conference call contains forward looking statements.
Statements may include but are not limited to anticipated future financial and operating results and silicones outlook and prospects.
Speaker Change: Those statements are based on management's current beliefs expectations and assumptions and assumptions, which may be affected by subsequent business political environmental regulatory economic and other factors and conditions and are subject to known and unknown risks and uncertainties and factors many of which are outside of silicones control, which may cause.
Speaker Change: Actual results to differ materially from expectations expressed or implied in the forward looking statements.
Kenny Green: These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on a limited number of customers, the speed and extent to which Silicom's solutions are adopted by the relevant market, Difficulties in the commercialization and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property competition, disruptions to manufacturing and sales and marketing, development and customer support activities, the impact of war in Israel and in Ukraine, rising inflation, changing interest rates, volatile exchange rates. Tariffs as well as any continuing or new effects resulting from the COVID-19 pandemic and global economic uncertainty which may impact customer demand through customers exercising greater caution and selectivity with their short-term IT investments.
Speaker Change: These include but are not limited to silicones, increasing dependence of substantial revenue growth on a limited number of customers the speed and extent to which telecom solutions are adopted by the relevant market.
Speaker Change: Difficulties in the commercialization and marketing of silicones products and services.
Speaker Change: Maintaining and protecting brand recognition protection of intellectual property competition disruptions to manufacturing and sales and marketing development and customer support activities. The impact of war in Israel and in Ukraine, rising inflation changing its interest rates volatile exchange rates.
Speaker Change: Harris as well as any continuing or new effects, resulting from the COVID-19, pandemic and global economic uncertainty.
Speaker Change: <unk>, which may impact customer demand through customers exercising greater caution and selectivity with a short term investment plans.
Kenny Green: The factors noted are not exhaustive.
Speaker Change: The factors noted on not exhaustive.
Kenny Green: Further information about the company's business, including information about factors that could materially affect Silicom's results of operations and financial conditions, are discussed in Silicom's annual report on Form 20F and other documents filed by the company, and that may be subsequently filed by the company from time to time with the Securities and Exchange Commission. Therefore, there can be no assurance that actual future results will not differ significantly from anticipated results. Consequently, investors are reminded not to rely on these forward-looking statements. Silicom does not undertake to update any forward-looking statement as a result of new information or future events or developments, except as may be required by law.
Speaker Change: Further information about the company's business, including information about factors that could materially affect telecoms results of operations and financial conditions are discussed and Silicon <unk> annual report on form 20-F, and other documents filed by the company and that May be subsequently filed by the company from time to time with the Securities and Exchange Commission.
Speaker Change: Therefore, there can be no assurance that actual future results will just that will.
Speaker Change: It does not differ significantly from anticipated results. Consequently investors are reminded not rely on these forward looking statements to that <unk> does not undertake to update any forward looking statement as a result of new information or future events or developments, except as may be required by law.
Kenny Green: In addition, following the company's disclosure of certain non-GAAP financial measures, in today's earnings release, such non-GAAP financial measures will be discussed during this call. Such non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes that the presentation of these non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing corporations and prospects for the future. Unless otherwise stated, it should be assumed that the financials discussed in this conference call will be on a non-GAAP basis. Non-GAAP financial measures disclosed by management are provided as additional information to investors.
Speaker Change: 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 school such non-GAAP measures are used by management to make strategic decisions forecast future results and evaluate the Companys current performance management believes that the.
Speaker Change: <unk> of these non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing cooperation and prospects for the future unless otherwise stated it should be issued that the financials discussed in this conference call will be on a non-GAAP basis non-GAAP financial measures disclosed by management are provided as additional information to investors.
Speaker Change: Just to provide them with an alternative method for assessing the company's financial condition and operating results. These measures. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non-GAAP financial GAAP measures are included in today's earnings release, which you can find instead it comes website.
Kenny Green: the press.
Kenny Green: And with us on the line today, we have Mr. Liron Eizenman, President and CEO, and Mr. Eran Gilad, CFO. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financials.
Speaker Change: And with US on the line today, we have Mr will be run Eisenman, President and CEO and Mr. <unk> Gilad CFO and Ron will begin with an overview of the results followed by Ron who will provide the analysis of the financials. We will then turn the call over to the question and answer session.
Kenny Green: We'll then turn the call over to the question and answer session.
Kenny Green: And with that, I would now like to hand the call over to Liron. Liron, please go ahead. Thank you, Kenny.
Speaker Change: Now I'd like to hand, the call over to Iran, Iran. Please go ahead.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Thank you Kenny.
Liron Eizenman: I would like to welcome everyone to our conference call to discuss the results of the first quarter of 2024. We are pleased with our start to 2025, which reflects solid execution and progress in line with our strategic plans aimed at bringing renewed revenue growth, profitability, and ultimately increased shareholder value. In addition, we saw significant design win momentum and made strong progress growing our mid- and long-term pipelines. The quarter demonstrates that we are advancing and achieving meaningful milestones with various customers and projects, and all this makes us more optimistic that we will drive an acceleration in revenue growth in 2026 and beyond.
Speaker Change: I would like to welcome everyone to our conference call to discuss the results of the first quarter of 2025.
Speaker Change: We are pleased with our start to 2025, which reflects solid execution and progress in line with our strategic plan aimed at bringing renewed revenue growth profitability and ultimately increase shareholder value. In addition, we saw significant design win momentum and made strong progress growing our mid and long term pipeline the quarter.
Speaker Change: Demonstrates.
Speaker Change: We are advancing in achieving meaningful milestones with various customers and projects and all of this makes us more optimistic that we will drive an acceleration in revenue growth in 2026 and beyond in terms of the financial results. We delivered revenues of $14 4 million, which were in line with our targets and delivered gross margin and operating expenses.
Liron Eizenman: In terms of the financial results, we delivered revenues of $14.4 million, which were in line with our targets and delivered gross margin and operating expenses in line with our strategic plans. Our balance sheet has therefore continued to remain very strong. Our working capital and marketable securities amounted to $119 million, including $77 million in cash, deposits, and highly rated bonds with no debt. All this represents about $21 per share. This ensures we can maintain adequate investment in our business and its growth engines, even in this very volatile market, without compromise.
Speaker Change: In line with our strategic plan our balance sheet is therefore continue to remain very strong our working capital and marketable securities amounted to $119 million, including $77 million in cash deposits and highly rated bonds with no debt. All of this represents about $21 per share. This ensures we can maintain adequate.
Speaker Change: Investments in our business and its growth engines, even in this very volatile market without compromise from a strategic perspective, I'm very happy to report that we are on track with our plan to return to solid double digit growth rates materializing gradually from 2026 to remind you the long term financial goals of our strategic plan to deliver an EPS.
Liron Eizenman: From a strategic perspective, I am very happy to report that we are on track with our plan to return to a solid double-digit growth rate, materializing gradually from 2026. To remind you, the long-term financial goals of our strategic plan are to deliver an EPS above $3 based on revenues between $150 and $160 million. The most tangible indicator of our progress is the impressive number of design wins closed during the quarter and the breadth and depth of our design win opportunity funnel. A renewed focus on our core product lines coupled with a deep relationship with our customers and potential new customers has created a solid pipeline enabling our future growth potential.
Speaker Change: Above $3 based on revenues between 150 and $160 million.
Speaker Change: The most tangible indicator of our progress is impressive number of design wins closed during the quarter and the breadth and depth of our design win opportunity fund them a renewed focus on our core product lines, coupled with a deep relationships with our customers and potential new customers has created a solid pipeline, enabling our future growth potential.
Liron Eizenman: So far in 2025, we've already seen success in converting this pipeline to design wins, the main indication for the progress of our strategic plan. We expect to continue to convert this pipeline to further design wins throughout 2025. In our previous call, we discussed our target of achieving between seven and nine new design wins in 2025, and we are well on track. Since the beginning of the year, we have been awarded three important new wins, two with cybersecurity leaders and one with the Global Network Test Equipment Company, which together encompasses our full product range, from SmartNICs and FPGA-based products to our advanced edge systems. All three are repeat customers of ours that already rely on Silicom products to give their system performance edge, and all three have decided to expand their business with us as they embark on a new project.
Speaker Change: So far in 2025, we've already seen success in converting despite blind to design wins the main indication for the progress of our strategic plan. We expect to continue to convert these pipeline to further design wins throughout 2025.
Speaker Change: Our previous call, we discussed our target of achieving between seven and nine new design wins in 2025, and we are well on track.
Speaker Change: Since the beginning of the year, we have been awarded three important new wins, two with cyber security theaters and one with a global network test equipment company, which together encompasses our food product range from smart makes an FPGA based products to our advanced edge systems. All three are repeat customers of ours that already rely on silicon or silicon.
Speaker Change: Product to give their system performance edge and all three have decided to expand their business with us as they embark on a new project.
Liron Eizenman: I want to highlight those recent design wins in more detail. Number one, a U.S.-based global provider of advanced network testing equipment solutions selected our 100-gigabit network interface cards for their next-generation platform. This customer placed an initial purchase order to cover its new product introduction needs, and we expect mass deployment to begin in early 2026. Once the product ramps up, we expect the total business with this customer to be $2.5 million per year. We are very proud that this global giant turned to us for a performance edge, and it speaks volumes about the innovation at the heart of our high-performance NICs and our reliability as a design partner.
Speaker Change: I want to highlight those recent design wins in more detail number one a U S based global provider of advanced network testing solutions selected our 100 gigabit network interface cards for the next generation platform. This customer placed an initial purchase order to coverage new product introduction needs and we expect mass deployment to begin in early 2020.
Speaker Change: Six once the product ramps up we expect the total business with this customer to be $2 $5 million per year. We are very proud that this global giant turned to us for a performance edge and it speaks volumes about the innovation at the heart of our high performance and reliability as a design partner customers such as disrupt.
Liron Eizenman: Customers such as this represent the backbone of our business, with the potential to secure new design wins with a shorter sales cycle process, contributing to a growing base of revenue. Number two, we also won a design win with a U.S.-based cybersecurity leader choosing our latest Altera-based 400-gig FPGA smart card for its new network monitoring offering. The customer placed an initial order with us, and at full ramp-up, we expect revenues will reach $3 million per year. This design win represents the successful conclusion of many months of collaborative effort with the customer. As a full-service supplier, we work closely with the customer to meet the feature set and performance requirements, to deliver them as a complete solution, fully integrated and tested within a server.
Speaker Change: Presents the backbone of our business with the potential to secure new design wins with a shorter sales cycle process contributing to a growing base of revenues.
Speaker Change: Number two we also won a design win with a U S based security cybersecurity leader choosing our latest Alterra based 400 gig FPGA smartcard for its new network monitoring offering the customer placed an initial order with us and at full ramp up we expect revenues, we reached $3 million per year. This design win represents the successful.
Speaker Change: Conclusion of many months of collaboration of collaborative effort with the customer as a full service supplier. We worked closely with the customer to meet the feature set and performance requirements to deliver them. It is a complete solution fully integrated and tested within a server. This demonstrates the added value of Silicon engineering talent.
Liron Eizenman: This demonstrates the added value of Silicom's engineering talent, who customers often view as an extension of their own R&D team. This win demonstrates the importance of the full package that we offer, a uniquely broad product line based on advanced technology, hands-on collaboration with the customer, and a rapid development and delivery capability.
Speaker Change: Customers often viewed as an extension of their own R&D team.
Speaker Change: This win demonstrates the importance of the full package that we offer a uniquely broad product line based on advanced technology hands on collaborations with the customer and their rapid development development in the delivery capability.
Liron Eizenman: Number three, a major U.S. cybersecurity customer of ours awarded us a design win for a customized version of a wireless connectivity enabled Silicom Edge system incorporating a Silicom network interface card for the next generation of one of its leading product lines. Our ability to carry out the required customization quickly and to provide both the Edge system and the network interface card that are incorporated within the system together with our deep wireless know-how were key factors in securing the win. We expect demand to continue to build for our Edge systems smart network interface cards and innovative products that integrate the two, becoming a key driver of our future growth.
Speaker Change: Number three a major U S cyber security customer of ours awarded US a design win for a customized version of a wireless connectivity enabled silicon edge system, incorporating a cynical network interface card for the next generation of one of its leading product lines, our ability to carry out the required customization quickly and to provide both U S.
Speaker Change: System and the network interface card that are incorporated within the system together with our deep wireless Knowhow were key factors in securing the win we expect demand to continue to build for Ed systems Smart network interface cards and <unk>.
Speaker Change: <unk> products that integrate it to becoming a key driver of our future growth.
Liron Eizenman: Initial orders have been received, and we expect to start ramp up during the second half of 2025 with revenues of $2 million per year at the full run rate. This win expands the relationship that Silicom has been building with the client for several years, ramping up the range of products sold from network interface cards to complex Edge Those types of REIN are now our focus, building steady, long-term and trusting relationships that give rise to multiple deals, leveraging a reliable diversified revenue stream from an expanding base over the long term. The relationships are based on deep trust built over a long period of time and show slow but solid growth, supporting the success of our strategic plan.
Speaker Change: Initial orders have been received and we expect to start to ramp up during the second half of 2025 with revenues of $2 million per year at the full run rate. This win expensive relationship that silicon has been building with a client for several years ramping up the range of products thoughtful network interface cards too complex edge systems those types of win an hour.
Speaker Change: Focus building steady long term and trusting relationships that give rise to multiple deals leveraging a reliable.
Speaker Change: <unk> revenue stream from an expanding base over the long term the relationships are based on deep trust built over a long period of time and show slow, but solid growth supporting the success of our strategic plan.
Liron Eizenman: The power of each design is not only to generate its own stream of recurring revenues, but also to open the door to multiple additional opportunities. This combination, along with a growing number of potential new customers who are currently evaluating and testing our products, underlines our confidence in achieving our target for seven to nine design wins during 2025. While our recent design wins will have a minor positive impact on our financial results in 2025, we believe those and others that we expect to sign in the coming months will form the foundation for a significant growth in 2026.
Speaker Change: The power of each design win is not only to generate its own stream of recurring revenues, but also to open the door to multiple additional opportunities. This combination along with the growing number of potential new customers. We're currently evaluating and testing our products underlines our confidence in achieving our target for seven to nine design wins during 2020.
Speaker Change: Five.
Speaker Change: While our recent wins design wins will have a minor positive impact on our financial results in 2025, we believe those and others that we expect to sign in the coming months will form the foundation for significant growth in 2026, I note that if the opportunities in the pipeline ramp faster than expected, we could achieve the goals of our strategic plan.
Liron Eizenman: I note that if the opportunities in the pipeline ramp faster than expected, we could achieve the goals of our strategic plan significantly sooner than currently projected. Our pipeline of opportunities at the input of our DesignWinz funnel is very broad across all our products, including ad systems, SmartNICs, and FPGAs, and includes both new and existing customers. This pipeline includes leading names in the cybersecurity, service provider, and networking industries, highlighting the strength and appeal of our technology offerings. We believe that during the coming years, we will see more and more opportunities turn into DesignWinz, and we are constantly adding further opportunities at the entry point of the funnel.
Speaker Change: Significantly sooner than currently projected.
Speaker Change: Our pipeline of opportunities at the input of our design win funnel is very broad across all our products, including edge systems Smart <unk> and FPGA and include both new and existing customers. This pipeline includes the leading names in the cyber security service provider and networking industries, highlighting the strength and appeal of our technology offerings.
We believe that during the coming years, we will see more and more opportunities turn into design wins and we are constantly adding further opportunities at the entry point of the find them. This is the main engine behind our strategy for growth I want to highlight a new investor presentation available on our website, which includes examples of many opportunities in our pipeline at all.
Liron Eizenman: This is the main engine behind our strategy for growth. I want to highlight our new investor presentation available on our website, which includes examples of many opportunities in our pipeline. It also shows examples of the opportunities that made it through the funnel and became DesignWinz, driving revenue growth. We are seeing the positive impact of our strategic plan, expanding the pool of future opportunities with small to medium DesignWinz, as well as potential deals in the range of double-digit millions of dollars in annualized revenue. Considering the impressive pipeline, and by executing all aspects of the strategy, we continue to believe that we will achieve the main goal of our strategy to create significant value for our shareholders with TPS of about three dollars based on revenues in the range of 150 to 160 million dollars over the long term.
Speaker Change: Though shows examples of the opportunities that made it through to find them and became design wins driving revenue growth. We are seeing the positive impact of our strategic plan expanding the pool of future opportunities with small to medium design wins as well as potential deals in the range of double digit millions of dollars in annualized revenue.
Speaker Change: Considering the impressive pipeline and by executing all aspects of the strategy. We continue to believe that we will achieve the main goal of our strategy to create significant value for our shareholders with EPS of about $3 based on revenues in the range of $150 million to $160 million over the long term a fast ramp up of a few of the potential deals we have in the pipe.
Liron Eizenman: A fast ramp-up of a few of the potential deals we have in the pipeline may help us to achieve this goal much faster than currently indicated in our strategic plan, and we are fully focused on making this happen.
Speaker Change: <unk> may help us to achieve this goal much faster than currently indicated in our strategic plan and we are fully focused on making this happen.
Liron Eizenman: Looking ahead, in terms of guidance, we continue to project low single-digit growth for 2025, with double-digit growth expected for 2026. For the second quarter, we expect between $14.5 million and $15.5 million in revenue.
Speaker Change: Looking ahead in terms of guidance, we continue to project low single digit growth for 2025 with double digit growth expected for 2026 for the second quarter, we expect between $14 5 billion and $15 $5 million in revenue in summary, we are pleased with our progress we are very optimistic about our ability.
Liron Eizenman: In summary, we are pleased with our progress. We are very optimistic about our ability to continue to execute on our growth plan and fully focus on meeting our goal of creating value for our customers and for our shareholders. We are advancing towards our mid- and long-term goals, with a robust pipeline that positions us well for double-digit growth from 2026 onward. As I have mentioned, we aim to achieve 7 to 9 design wins in 2025, of which 3 have already won, which demonstrates we are well on track. Looking further ahead, our focus remains on delivering long-term shareholder value, targeting an EPS above $3 on annual revenues of $150 to $160 million.
Speaker Change: To continue to execute on our growth than in.
Speaker Change: And fully focused on meeting our goal of creating value for our customers and for our shareholders. We are advancing towards our mid and long term goals with a robust pipeline that positions us well for double digit growth from 'twenty to 'twenty six onward, as I've mentioned, we aim to achieve 7% to nine design wins in 2025 of which three have already won.
Speaker Change: Which demonstrates we are well on track looking.
Looking further ahead, our focus remains on delivering long term shareholder value targeting and EPS above $3 on that and on annual revenues of $150 million to $160 million as I said.
Liron Eizenman: As I said, a faster ramp-up of a few of the potential deals we have within the pipeline may help us to achieve this goal faster.
Speaker Change: A faster ramp up of a few of the potential deals we have within the pipeline may help us to achieve this goal faster we have a solid design win roster full of tier one customers, coupled with a superb product and a robust pipeline of opportunities. We have strong financial foundation with a solid balance sheet with a very dedicated and loyal team possessing decades of experience.
Liron Eizenman: We have a solid design win roster full of Tier 1 customers, coupled with a superb product and a robust pipeline of opportunities. We have a strong financial foundation with a solid balance sheet. With a very dedicated and loyal team possessing decades of experience in the hardware business, we are optimistic about our ability to execute our strategic plan and meet our goals.
Speaker Change: In the hardware business, we are optimistic about our ability to execute our strategy strategic plan and meet our goals.
Liron Eizenman: We look forward to reporting on our progress as we continue executing on our growth strategy.
Iran: We look forward to reporting on our progress as we continue executing on our growth strategy with that I will now hand over the call to run for a detailed review of the quarter results, Iran. Please go ahead.
Eran Gilad: With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead.
Eran Gilad: Thank you, Liron, and good day to everyone. Revenues for the first quarter of 2025 were $14.4 million, similar to the $14.4 million reported in the first quarter of last year. The geographical revenue breakdown over the last 12 months was as follows. North America 78%, Europe and Israel 14%, Far East and rest of the world 8%. During the last 12 months, our two 10%-plus customers together accounted for about 24% of our revenue.
Iran: Thank you Leon and good day to everyone.
Iran: Revenues for the first quarter.
Iran: 2025 were $14 4 million.
Iran: Similar to the $14 $4 million reported in the first quarter of last year.
Iran: The geographical revenue breakdown over.
Iran: Over the last 12 months was as follows North America, 78%, Europe, and Israel, 14% far east and rest of the world 8%.
Iran: During the last 12 months our top.
Iran: Our 210% plus customers together accounted for about 24% of our revenues.
Eran Gilad: I will be presenting the rest of the financial results on a non-gap basis. which excludes the non-cash compensation expenses in respect of options and RSUs granted to directors, officers, and employees, taxes on amortization of acquired intangible assets, as well as lease liabilities, financial income. For the full reconciliation from GEP to non-GEP numbers, please refer to the press release we issued earlier today. Gross profit for the first quarter of 2025 was $4.4 million, representing a gross margin of 30.3% compared to a gross profit of $4.1 million or gross margin of 28.5% in the first quarter of 2024.
Iran: I will be presenting the rest of the financial results on a non-GAAP basis.
Iran: Which excludes the noncash compensation expenses in risk.
Iran: <unk> of options and our Skus granted to directors officers and employees, Texas on amortization of acquired intangible assets as well as lease liabilities Ts financial income.
Iran: For the full reconciliation from GAAP to non-GAAP numbers. Please refer to the press release, we issued earlier today.
Iran: Gross profit for the first quarter of 2025 was $4 $4 million.
Iran: Representing gross margin of 33% compared to a gross profit of $4 $1 million or gross margin of 28, 5% in the first quarter 2024.
Eran Gilad: As discussed previously, our short-to-mid-term expected gross margin range is between 27% to 32%, and as our revenues grow from current levels, over the longer term, it is expected to increase towards the upper end. Operating expenses in the first quarter of 2025 were $6.7 million compared with $6.8 million reported in the first quarter of 2025. Operating loss for the first quarter of 2025 was $2.4 million compared to an operating loss of $2.7 million as reported in the first quarter of 2024. Net loss for the quarter was $2.1 million, compared to a net loss of $2.4 million in the first quarter of 2021.
Iran: As discussed previously our short to midterm expected gross margin range is between 27% to 32% and as our revenues grow from current levels, although the longer over the longer term. It is expected to increase towards the upper end.
Iran: Operating expenses in the first quarter of 2025 or $6 $7 million compared with $6 8 million reported in the first quarter of 2024.
Iran: Operating loss for the first quarter was 2025 was $2 4 million compared to an operating loss of $2 $7 million as reported in the first quarter of 'twenty 'twenty four.
Iran: Net loss for the quarter was $2 $1 million.
Iran: Compared to a net loss of $2 4 million.
Iran: In the first quarter of 2024.
Eran Gilad: Loss per share in the quarter was $0.37. This is compared with loss per share of $0.38 as reported in the first quarter of last year.
Iran: Those cost sharing the quarter was 37.
Iran: This is compared with loss per share of 38 cents as.
Iran: As reported in the first quarter.
Iran: Last year.
Eran Gilad: Now, turning to the balance sheet, as of March 31, 2025, our working capital and marketable securities amounted to $119 million, including $40 million in high-quality inventory, accounts receivable, net of accounts payable of $3 million, and $77 million in cash, cash equivalents, and highly-rated marketable securities with no debt.
Iran: Now turning to the balance sheet.
Iran: As of March 31, 2025, our working capital and marketable securities amounted to $119 million, including $14 million in high quality inventory and accounts receivable net of accounts payable of $3 million and.
Iran: $77 million in cash cash equivalents and highly rated marketable securities with no debt.
Eran Gilad: That ends my summary.
Iran: That ends my summary, I would like to and back over to the operator for <unk>.
Eran Gilad: I would like to hand back over to the operator for questions and answers session. Operator? Thank you.
Iran: <unk> and answer session.
Iran: Victor.
Operator: Ladies and gentlemen, at this time, we will 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. If you're 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 questions.
Iran: Thank you ladies and gentlemen at this time, we will 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 if you are using speaker equipment kind of live with that the handset before pressing the numbers questions would be pulp in the order. They are received please standby while we poll for.
Iran: Of your questions.
Ryan Koontz: The first question is from Ryan Koontz of Needham & Co. Please go ahead. Great. Thanks for the question. And great to hear about the progress with your new design wins there.
Speaker Change: The first question is from Ryan Koontz of Needham <unk> Company. Please go ahead.
Iran: Alright, thanks for the question.
Speaker Change: Glad to hear about the progress with your.
Speaker Change: New design wins, there are there particular milestones youre tracking for those design wins. After you have these initial orders and contracts.
Liron Eizenman: Are there particular milestones you're tracking for those design wins, you know, after you have these initial orders and contracts with these customers that you can maybe, I'm not looking for specifics, but just at a high level, what sort of milestones you're tracking and how you feel about the progress of those wins as we look toward over the next few quarters? Thank you. So every design is a little bit different, but in general, once we get the wind, there's the first stage where we probably need to do some customizations for the customer, maybe some development. So that's obviously one milestone we need to keep track of is our internal process of the development and customization, make sure with the customer everything is clear on the specs and what they're supposed to get and when.
Speaker Change: Contracts with these customers that you could maybe I'm not looking for specifics, but just at a high level, what's what sort of milestones you're tracking and how you feel about the progress of those wins.
Speaker Change: We look toward over the next few quarters. Thank you.
Speaker Change: So every design wins, a little bit different but in general those are once we get the windows, the first stage, where we need to.
Speaker Change: I, probably need to do some customization for the customer maybe some development. So that's obviously one milestone we need to keep track of is the our internal process of the development and customization make sure with the customer everything is clear on the specs and what they are supposed to get in and win once we already where we're shipping samples of shipping.
Liron Eizenman: Once we are ready, we're shipping samples or shipping first shipments to the customer. We want to see they're happy. We want to see we get their green light for mass production. That's another very important milestone. And the third one is when we start mass production, start shipping the products, we work very closely with them to see that they're happy with that, that they're selling it to their customers, their customers are happy. That's, I would say, the third main milestone.
Speaker Change: For shipment to the customer we want to see Theyre happy we want to see we get the green light for mass production, but that's another very important milestone and the third one is when we start a mass production start shipping them. The products. We work very closely with them to see that they're happy with that that they're selling it to their customers their customers are happy.
Speaker Change: That's I would say the third main milestone, but every project is a little bit different.
Ryan Koontz: But every project is a little bit different. That's great. Thank you for that.
Speaker Change: That's great.
Liron Eizenman: And it sounds like one of your design wins is with an Altera design. Are you seeing an increased, you know, mix or, you know, requirement from customers to roll out FPGA-based NIC cards or interfaces? We see quite a lot of demand in every one of our main product lines, so FPGA is definitely one of them. Altera is definitely a key partner for us, for our FPGA business. Definitely we see a lot of interest in that market, and the proof of that is that we actually saw a design win, as we published earlier this year. And we also announced just recently, actually last week, a cooperation we're doing with an IP partner of ours called Identicom.
Speaker Change: And.
Speaker Change: You sound like one of your design wins is with Altair or design or are you seeing an increased mix.
Speaker Change: Mixing into or requirement.
Speaker Change: From customers to rollout the FPGA based.
Speaker Change: Cards or enterprises.
Speaker Change: Oh, we see quite a lot of demand in every one of our let's say may meet our main product.
Speaker Change: Product lines. So FPGA is definitely one of them, but there is definitely keep talking for us for our FPGA business, but definitely we see a lot of interest in that market and in the proof of that is that we actually saw a design win as we published our earlier this year.
Speaker Change:
Speaker Change: And we also announced just recently actually last week, a cooperation we're doing with an IP partner of ours called identical.
Liron Eizenman: We announced a strategic partnership with them that allows us now to bring together a product that is very critical for the cybersecurity and other network vendors' equipment to protect their equipment and solutions, not only for today, but for post-quantum encryption that will become very, very important soon. So this is something that we're both investing in and also seeing a lot of traction.
Speaker Change: We announced a strategic partnership with them.
Speaker Change: That allows us now to bring together.
Speaker Change: A product that is very critical for the cyber security and other network vendor's equipment.
Speaker Change: To protect their equipment and solutions not only for today, but for bus quantum encryption that will become very very important soon so so this is something that we are.
Speaker Change: Both investing in and also seeing a lot of traction.
Liron Eizenman: Great. And maybe one more if I could. What are your thoughts around tariffs and how that gets implemented? Is that something you expect your customers to pay or will you have to pay that and maybe have to add a line item around tariffs? What you're thinking around the tariff situation? I know it's fluid right now, but any kind of baseline would be helpful. As you said, it's very fluid, so that's number one. At least at the moment, Silicom, we do not see an immediate impact. Our products at the moment are exempt because of their classification, so they're exempt from any tariff right now.
Great and maybe one more if I could.
Speaker Change: What are your thoughts around tariffs and how that gets implemented is that something you expect your customers to pay and we have to you have to pay that and maybe I'll have to.
Speaker Change: We were out of line item around tariffs, what's your thinking around the.
Speaker Change: Around the tariff situation I know, it's fluid right now but.
Speaker Change: Any kind of baseline would be helpful.
Speaker Change: Yeah. So as you said, it's very fluid. So that's number one at least at the moment silicon, we do not see an immediate impact.
Speaker Change: Products at the moment are exempt because of the reclassification.
Speaker Change: So they are exempt from any tariff right now.
Liron Eizenman: We definitely monitor that very closely and stay very alert to see how that pans out eventually. We're looking at different models and what would make sense, if we would make a change, what kind of change. I think it's very fluid, as you said, and right now, since our products are exempt, we don't see any immediate demand. We just keep in touch with our customers, hear their thoughts, and just keep tracking whatever comes out, so we'll make sure that we can react if we need to react when something comes out.
Speaker Change: We definitely monitor that very closely and stay very alert to see how that beds out eventually.
Speaker Change: We're looking at different models, and what would make sense. If we would make a change what kind of change, but I think it's very fluid as you said and right now since our products are exempt we don't see any immediate demand. We just keep in touch with a customer who would have thought.
Speaker Change: And just keep trucking whatever we whatever comes out so we'll make sure that we can react if we need to react when something comes out.
Ryan Koontz: Okay, that's great. That's all I've got. Thank you.
Speaker Change: Okay. That's great. That's all I've got thank you.
Christopher Bormsen: The next question is from Christopher Bormsen of DNB. Please go ahead. Thanks for taking my question, just having a look at some of the design wins you have in your pipeline with the data infrastructure, storage networking kind of thing, $10 million per year, just trying to understand what kind of applications you are seeing here, more specifically driving this kind of step change in your growth in the next years compared to historical levels.
Christopher: The next question is from Christopher <unk> of Dnb. Please go ahead.
Christopher: Yeah. Thanks for taking my question you have to just having a look at some of those assignments you have in your pipeline.
Christopher: Data infrastructure storage networking kind of thing 10 million units or dollars per yard story, just trying to understand like what kind of applications. You are seeing here more specifically driving this kind of a step change in your and your growth in the next years compared to historical levels.
Liron Eizenman: So, I mean, I think I would also refer you to our investor presentation to look at the pipeline a little bit. We try to give the pipeline over three main product lines, and that is over our Smart X, over our FPGA product, and over our edge systems. And we see quite a lot of demand in all of them. We see in cyber security, definitely, that's one area that really requires us to, you know, put out new products out there. Higher speeds in networking are needed. More acceleration and offloading from the main CPU is needed as encryption, decryption, and compression, decompression is becoming more challenging as the main CPUs need to do more and more.
Christopher: So I mean, I think I would also refer you to our investor presentation to look at the pipeline a little bit we try to give the pipeline over three main product lines and that is overall smarttix over our FPGA product and over our AD systems.
Christopher: We see quite a lot of demand in all of them.
Christopher: We see and cyber security definitely that's one area that really requires us to.
Christopher: For those new products out there higher speeds in networking are needed more acceleration in offloading from the main CPU as needed as in.
Christopher: And creation decryption and compression decompression is becoming a more challenging as the main cpus need to do more and more we see also with our H systems more and more as we also.
Liron Eizenman: We see also with our edge systems, more and more, as we also provide higher-end solutions into the market, we're able to support our customers not only with lower-end systems, but also with our higher-end systems. We've seen a few examples of those design wins in the last year. So, I think overall, we see a lot of demand for networking. There's a lot of networking needs out there, and we are, as we work very closely with customers, they really trust us on both on the R&D level and later on in the mass production level. We are the right partner for them, and they keep bringing to us more and more business.
Christopher: Provide higher end solutions into the market, we're able to support our customers not only with lower end system, but also with our higher end systems. We've seen a few examples of those design wins in the last year. So I think overall, we see a lot of demand for networking, there's a lot of networking needs out there and we are as we worked very closely with customers.
Christopher: They really trust us on both on the R&D level and later on in the bus production level.
Christopher: We are the right partner for them and they keep bringing to us more and more business. Just an example for that is the last three design wins, we announced are from existing customers basically trusting us with more and more projects.
Liron Eizenman: Just an example for that is the last three design wins we announced are from existing customers, basically trusting us with more and more projects, and those customers have a lot of hardware projects. So, a lot of our pipeline is also from existing customers, not only new customers.
Christopher: And those customers have a lot of hardware projects. So it's a lot of our pipeline is also from existing customers not only new customers.
Don Mckiernan: The next question is from Don McKiernan of Landolt Securities. Please go ahead. Thank you.
Speaker Change: The next question is from <unk>.
Speaker Change: Don Mckiernan of Landolt Securities. Please go ahead.
Speaker Change: Thank you.
Eran Gilad: Did you already give an update on your shared buyback program and what occurred during the quarter? We moved forward during the first quarter. and we purchased... a few dozen thousands of buyback shares. It's doubly and so just. Like 36,000 shares is all you bought back.
Speaker Change: Did you already give an update on your share buyback program and what occurred during the quarter.
Speaker Change: We.
Speaker Change: <unk> moved forward during the first quarter.
Speaker Change: And we purchased.
Speaker Change: A few hundred a few dozen thousands of buyback shares.
Speaker Change: That's the tablet.
Speaker Change: So just.
Speaker Change: Like 36000 shares as all you bought back.
Eran Gilad: Can you repeat your How many shares did you buy in the quarter and at what average price? First of all, I would say that during the last five quarters, I mean starting 2024, we purchased over 700,000 shares. The portion in quarter one was a little bit less than 100,000 shares.
Speaker Change: Can you repeat it.
Speaker Change: Question, how many shares did you buy in the quarter and at what average price.
Speaker Change: First of all I would say that during the last.
Speaker Change: A five quarters I mean, starting 2024, we purchased over 700000 shares.
Speaker Change: The portion in quarter, one was a little bit less than 100000 shares.
Speaker Change: Okay.
Eran Gilad: Um, why wouldn't you buy more? Or the market conditions just didn't allow you, what can you explain? This is a result of the activity in the market in each day. When the volume is not so high, it means that the portion that we are able to purchase is limited. Right.
Speaker Change: Why wouldn't you buy more or.
Speaker Change: The market conditions, just doesn't allow you to work can you explain.
Speaker Change: This is a result of.
Speaker Change: The activity in.
Speaker Change: In this in the market.
Speaker Change: Each day.
Speaker Change: The volume is not so high.
Speaker Change: Yeah.
Speaker Change: I mean that the portion that we are able to purchase it.
Speaker Change: There.
Speaker Change: Is limited.
Eran Gilad: And how much do you have left in your current? in terms of dollars occurrence shared by that program. During the last year, we purchased over $8 million.
Speaker Change: Right and how much do you have left under your current.
Speaker Change: In terms of dollars at current share buyback program.
Speaker Change: During the <unk>.
Speaker Change: During.
Speaker Change: I would say that during the last year, we purchased over $8 million.
Eran Gilad: And what's left? 7 million? 7 million left? Can you repeat?
Speaker Change: And what slipped seven 7 million.
Speaker Change: Yes.
Can you repeat.
Eran Gilad: Yeah, how much is left in the office? How much is left? about $8 million. Okay, thank you.
Speaker Change: Yeah, how much is left in the world.
Speaker Change: How much is left.
Speaker Change: About $8 million.
Speaker Change: Okay. Thank you and my next question the last question.
Don Mckiernan: And my next question, last question. A year and a half ago, when revenues declined, some of your major customers were still working off excess inventory on some of your larger opportunities. Has that passed, and are they going to start reordering their larger quantities, or have those opportunities gone away? I'm sorry, I couldn't hear the first part of the question, can you repeat? Yeah, I believe about a year and a half ago, you had some large opportunities in closed design when Those customers that built up excess inventory during COVID and they were working off those inventories.
Speaker Change:
Speaker Change: A year and a half ago when revenues decline.
Speaker Change: Some of your major customers were still working off excess inventory on some of your larger opportunities.
Speaker Change: Is that.
Speaker Change: Tests that are they going to start reordering.
Speaker Change: The larger quantities are those opportunities.
Speaker Change: Throwing away.
Speaker Change: I'm, sorry, I couldn't hear the first part of the question can you repeat.
Speaker Change: Yeah, I I believe.
Speaker Change: About a year and a half ago, you had some large opportunities globally.
Speaker Change: <unk> closed design wins.
Speaker Change: And.
Speaker Change: So those customers that built up excess inventory during COVID-19 and they're working off those inventories.
Liron Eizenman: on large deployments and they were going to then come back and reorder product, as I recall, from you once they worked off their internal inventories. So, I mean, we did mention there's excess inventories to some of our customers and we do see some relief in that. We said we will continue to see that in 2025. We see some relief. Some customers are coming and buying back. Again, some things they didn't buy for a while. I wouldn't say this problem completely went away. Partially it went away. We think it will continue throughout 2025, and we'll see some ramp-up coming back.
Speaker Change: On large deployments and they were going to then come back and reorder products as I recall.
Speaker Change: From you once they worked off our internal inventories.
Speaker Change: So I mean, we did mentioned there's excess inventories to some of our customers and we do see some relief in that we said we will continue to see that in 2025.
Speaker Change: We seek some relief some customers are coming in buying back against some things they didn't buy for a while.
Speaker Change: Didn't say this problem completely went away.
Speaker Change: Partially it went away we think it will continue throughout 2025.
Speaker Change: And we will we will see some ramp up coming back.
Liron Eizenman: You know, each project is different, and each situation is different. I don't know to say that all of them will come back. It really depends on the situation. We don't know exactly how it will come back because, you know, technology moves on. Situations within certain companies change along the way. We hope that many of them will come back and will buy more. We keep in touch with them, but it really changes from case to case. We know for sure, this is something we said back then, that we don't know exactly who will come back, and we know that maybe some of them will not.
Speaker Change: Each project is different and each situation is different I don't know to say that all of them will come back. It's it really depends on the situation.
Speaker Change: We don't know exactly how it will come back because you know.
Speaker Change: Technology moves on situations within certain companies changes along the way, we hope that many of them will come back and we'll buy them all we keep in touch with them, but it really changes from from case to case.
Speaker Change: We know for sure. This is something we said back then.
Speaker Change: That we know for sure that not because we don't know exactly what will come back and we know that maybe some of them will not.
That is again, something we're tracking very closely.
Liron Eizenman: Again, something we're tracking very closely. There's good and bad here. Some did, some did not. Some we're still keeping track, and hopefully their business will pick up.
Speaker Change: Theres, good and bad here, some did something not some we're still getting truck and hopefully their business will pick up but the I hope that answers your question.
Don Mckiernan: But I hope that answers your question. Yeah, thank you and good luck. Thank you.
Speaker Change: Yeah. Thank you and good luck. Thank you. Thank you.
Operator: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions.
Speaker Change: If there are any additional questions. Please press star one if you wish to cancel your request. Please press star two please standby, while we poll for more questions.
Operator: There are no further questions at this time.
Speaker Change: There are no further questions at this time before I ask Mr. Eisenman to go ahead with his closing statement I would like to remind participants that a replay of this call will be available by tomorrow on silicon website, Www dot silicon Dash USA.
Operator: Before I ask Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www.silicom-usa.com.
Liron Eizenman: Mr. Eizenman, would you like to make your concluding statement? Thank you, operator. Thank you, everybody, for joining the call and for your interest in Silicom.
Speaker Change: <unk> com Mr. Eisenberg, <unk> would you like to make your concluding statement.
Speaker Change: Thank you operator, thank you everybody for joining the call and for your interest in Silicon. We look forward to hosting you on our next call in three months good day.
Operator: We look forward to hosting you on our next call in three months. Good day. Thank you.
Speaker Change: Thank you. This concludes silicon <unk> first quarter 2025 results conference call. Thank you for your participation you May go ahead and disconnect.
Operator: This concludes Silicom's first quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: [music].