管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Second Quarter 2026 Results Conference Call. 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 EK Global Investor Relations at 1 (212) 378-8040 or view it in the News section of the company's website, www.silicom-usa.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin, please?
Thank you, operator. I would like to welcome all of you to Silicom's Second Quarter 2026 Results Conference Call. Before we start, I would like to draw your attention to the following safe harbor statement. During this call, we may make forward-looking statements within the meaning of applicable securities laws. These statements may include, among other things, statements regarding the company's strategy, market opportunities, customer demand, product development initiatives, industry trends, expected deployments of the company's solutions, financial outlook, revenue expectations, margins, operating expenses, profitability and future growth opportunities. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. These risks include, among others, those described in the company's press release issued today and in its filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The company undertakes no obligation to update any forward-looking statements. With us on the line today are Mr. Liron Eizenman, President and Chief Executive Officer; and Mr. Eran Gilad, Chief Financial Officer. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financials. We will then turn the call over to the question-and-answer session. And with that, I'd now like to hand the call over to Liron. Liron, please go ahead.
Thank you, Kenny, and good day, everyone. I'm very happy to share a truly outstanding set of results for the second quarter of 2026, results that came in significantly ahead of our expectations and that demonstrate the clear success of our strategic plan. Looking ahead and from our perspective in mid-2026, I have rarely been more excited about Silicom's strong momentum, upcoming potential, and the trajectory ahead. The second quarter was an exceptionally good one for Silicom, and it marks a clear acceleration of the growth inflection we talked about earlier this year. Revenues for the second quarter came in at $23.8 million, up a very strong 59% year-over-year and well ahead of the $20 million to $21 million guidance range we shared with you last quarter. Our strategic plan for the core business is tracking well ahead of our original expectations from when we first launched the plan. Our highly predictable platform of recurring revenue built on years of design win momentum, combined with the upside from our growth engine, is now driving a key inflection point in our business. You can see it clearly in the increasing trajectory of our revenue growth. Two quarters ago, in Q4 2025, we reported 17% year-over-year growth. Then we accelerated to 33% growth last quarter and now a further step up to 59% in the current quarter. Beyond that, we are maintaining and even further building on this momentum with the guidance for the next quarter, implying a further acceleration to 66% year-over-year growth at the upper end. This is a powerful accelerating trend, and it reflects the compounding contribution of our multiple recent design wins as they ramp. Importantly, our visibility into the remainder of this year has improved markedly over the past few months. As a result, we are raising our revenue guidance for the full year 2026 significantly to a range of $93 million to $95 million, up from our previous guidance of $82 million to $83 million. This higher guidance reflects the better-than-expected improvement in our core business and is further supported by the additional multimillion-dollar revenues that we now expect from AI inference production orders in 2026. We have discussed many times that the long-term growth and strength of our core business are best tracked via our design win momentum. As you may remember, for 2026 as a whole, we targeted between seven and nine new design wins. I'm very pleased to report that we are just over halfway through the year, and we've already secured seven new design wins. This means we are well on track to meet and to even exceed the upper end of the range. Those design wins achieved in recent months are the foundation for continued strong growth into next year and beyond. I want to spend a few moments discussing the design wins that we secured during the second quarter and more recently. During the quarter, in April, we announced an FPGA Smart NIC design win with a European leader in advanced encryption and secure communication solutions. The customer selected our solution following a successful evaluation, testing the performance and reliability required for its advanced encryption solutions, including post-quantum cryptography. This was our third post-quantum cryptography design win as we continue to build post-quantum cryptography as an emerging future growth engine for Silicom. We expect to scale towards an anticipated annual deployment of around $3 million. On top of that, we are in discussions regarding this customer's next-generation higher-speed FPGA Smart NIC, which is planned to launch in 2028, as well as potential full system solutions combining a server with an FPGA Smart NIC, opportunities that could each add meaningfully to our future revenues for Silicom. A few weeks later in May, we announced our first-ever white label switching design win. This was a win with a $5 million per year potential with a Tier 1 global security leader. Seeking to move away from vendor lock-in, the customer decided to replace its existing proprietary switches from an incumbent industry leader with Silicom's open white label switch solutions. The customer selected a full range of Silicom-designed white label switches as the networking infrastructure for its security platforms. First production orders are expected before the end of the year. More recently, in July, an existing blue-chip customer awarded us a new design win for a custom high-speed server adapter engineered to exact customer specifications for a specific use case. This win triples our expected business with this customer to nearly $10 million in 2027, a significant contribution to our growth in 2027 on top of the very strong growth we are already delivering in 2026. Those wins capture the essence of our strategy. First, each successful win opens the door to the next with satisfied customers coming back to us for additional products and additional use cases. Second, they reflect the compounding value of the long-term trusted supplier relationships we have cultivated over decades of operation with blue-chip customers. Together, they strengthen the visibility we have into continued growth in 2027 and beyond. Beyond the wins we already secured, our pipeline of potential opportunities remains very broad and deep, spanning all our core product lines, including systems, Smart NICs and FPGA-based solutions across both new and existing customers. We expect this pipeline to continue converting into design wins, laying the groundwork for sustained strong growth well beyond this year. Turning to our outlook for the third quarter, we expect revenues in the range of $25 million to $26 million, representing accelerated 66% year-over-year growth at the upper end of the guidance. For the full year, as I mentioned earlier, we raised our revenue guidance to a range of $93 million to $95 million, representing over 50% year-over-year growth. I want to emphasize a particularly important milestone: driven by our strong execution and the significant inherent leverage in our business model, we now expect to return to quarterly non-GAAP profitability during the second half of this year, significantly earlier than we had originally anticipated. This is a meaningful inflection point for Silicom and a clear demonstration of the earnings power that our rapidly growing revenues are beginning to unlock. Let me now turn to the exciting progress we are making in the AI inference market. We are very pleased with the tangible strong progress we achieved on the AI front in less than nine months. I want to highlight a few of our key AI-related engagements. Recently, we secured a design win with a pioneering AI inference acceleration provider and received the first production order from this customer. This is an important milestone, establishing a foundation for what we believe can become an exceptional revenue stream. Additionally, we successfully customized an AI NIC solution to meet the customer-specific needs, delivered the first unit to the customer for evaluation, and are preparing for initial deliveries of this customized product per purchase order received from the customer, a leading AI inference ASIC and infrastructure vendor. In parallel, we are expanding our AI inference product portfolio. And based on orders secured, we are now developing a completely new bespoke inference-specific solution. We are witnessing AI spending shift decisively from training to inference, and the rise of disaggregated inference architectures is positioning Silicom as a key player, bringing our networking know-how and building blocks to the architectures that power those workloads and creating significant new opportunities for us along the way. We view our rapid progress and expanding footprint in AI inference as a potential game changer for Silicom, and successfully capitalizing on this generational shift will significantly enhance our long-term growth trajectory. This brings me to our balance sheet, which remains exceptionally strong and provides us with the flexibility to invest in our growth while maintaining a conservative financial profile. At the end of June, our working capital and marketable securities totaled $107 million, representing approximately $19 per share, including $55 million in cash, cash equivalents, and highly rated marketable securities with no debt. In summary, this was an outstanding quarter, and it's an exciting time for Silicom. Our core business is accelerating rapidly with 59% year-over-year growth in the second quarter and third quarter guidance pointing to accelerated 66% growth at the upper end. At the same time, we are making fast and exciting progress on our AI inference upside. Our design win engine is firing on all cylinders with the lower end of our full year target already reached in only half a year. On the strength of this momentum and improved visibility, we have raised our full year revenue guidance to $93 million to $95 million, and we now expect to return to quarterly non-GAAP profitability in the second half of this year. This quarter demonstrates again the exceptional performance of our core business, which is the foundation for everything else we're doing. It is the success of our strategic plan and the strength of our core that gives us the platform, the customer relationships, and the balance sheet strength to invest in AI inference and other additive growth engines, each of which is an expansion of our core expertise, capabilities, customer base, and the same IP routes. We could not be more excited about Silicom's strong and accelerating momentum, and we are moving with confidence and determination to fully capture the opportunities ahead. We look forward to delivering strong and accelerating returns for our shareholders in the quarters ahead and over the long term. With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead.
Thank you, Liron, and good day to everyone. I will review the financial results and business performance for the second quarter of 2026. Before beginning the financial overview, I would like to remind you that unless otherwise indicated, all financial results are non-GAAP. A full reconciliation of our results on a GAAP to non-GAAP basis is available in the press release issued earlier today. We are very happy with our revenues for the second quarter of 2026, which were $23.8 million, 59% above the $15 million reported in the second quarter of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 79%; Europe and Israel, 13%; Far East and rest of the world, 8%. During the last 12 months, we had two 10%-plus customers, which accounted for about 23% of our revenues. Gross profit for the second quarter of 2026 grew 51% to $7.2 million compared to a gross profit of $4.8 million in the second quarter of 2025. I note that our gross margin of 30.4% in the quarter is at the upper part of our short- to mid-term expected gross margin range of 27% to 32%. Operating expenses in the second quarter of 2026 were $8.3 million compared with $7.2 million reported in the second quarter of 2025. I highlight that this is an increase of only 16% year-over-year compared with 59% revenue growth, a clear demonstration of the operating leverage inherent within our business model. Operating loss for the second quarter of 2026 was reduced to $1.1 million, a solid improvement from the operating loss of $2.4 million reported in the second quarter of 2025. This narrowing of the operating loss reflects the operating leverage inherent in our model as our revenue returned to strong growth and points clearly to the improving profitability profile we expect to deliver as our growth accelerates. Net loss for the quarter was reduced to $0.9 million, a 54% improvement compared with the net loss of $2 million in the second quarter of 2025. We are very pleased with the pace at which we are closing the gap to profitability, and we expect to return to quarterly non-GAAP profitability during the second half of this year, significantly earlier than we had originally anticipated. Loss per share in the quarter was $0.16, a significant improvement compared with a loss per share of $0.35 as reported in the second quarter of last year. Now turning to the balance sheet. As of June 30, 2026, our working capital and marketable securities amounted to $107 million, including $71 million in high-quality inventory and $55 million in cash, cash equivalents, and highly rated marketable securities with no debt. I would like to add a few words on the increase in inventory. We are intentionally building our inventory, both to support our strong revenue trajectory and to safeguard our ability to ensure uninterrupted product delivery to our customers. This is a deliberate proactive step, and we are leveraging our balance sheet strength to take it, effectively mitigating the impact of the currently extended lead times for memory chips and positioning us well to continue capitalizing on the growth opportunities ahead. That ends my summary. I would like to hand back to the operator for a question-and-answer session. Operator?
分析師問答
The first question is from Ryan Koontz of Needham & Company.
And just terrific results, guys. Really nice to see the business inflecting. Reflecting here on your accelerating revenue here in the first half of the year, are there any particular market verticals or use cases that are particularly strong within your core business that are resulting in the outperformance here in the first half or in the second quarter?
First of all, Ryan, thank you very much. What we're seeing is the core business. The core business is performing strongly across the board and across all product lines: FPGA, our standard adapters, acceleration adapters, and our edge systems. All of that is really growing in revenue. Many of the new products are not yet reflected in the revenues. Even the switches we announced will start only later in the year and will ramp up significantly more next year. The AI work and the post-quantum cryptography are also early in revenue contribution. I wouldn't single out a specific market or domain; it's really our core business that is driving all the growth.
And with regards to you've been able to hold gross margins in here pretty well given the creep up in COGS, I assume with your open BOM strategy with your customers that you've been able to raise price, and has pricing contributed to some of the revenue outperformance, pricing per unit?
It's a lot of hard work. We have a dedicated team that's working very hard on sourcing components at the best prices possible, and it's the relationships of years with manufacturers, suppliers and silicon vendors that allow us to get access and negotiate better pricing and availability. On top of that, it's continuous collaboration with customers: keeping them updated on the situation, describing industry challenges, and sometimes working together to find good solutions. All of that has helped us maintain gross margin. One more point I would add is that because of our very strong balance sheet, as Eran mentioned, we are able to build significant inventory intentionally, which in some cases allows us to keep prices down by buying ahead. That combination of hard work, a strong balance sheet, and long-term customers is delivering the result you mentioned.
With regards to memory costs, they've obviously been increasing. I've heard from other vendors that they are in the midst of, in some cases, redesigning products with lower memory. Is that something you're looking at in some cases? Or are your customers pretty pleased with your products and where they're at today?
We definitely do those kinds of evaluations, and it depends on the customer. Everything is a discussion with the customer for us. In some cases it requires a design change; sometimes the design itself can have more memory or less memory or more storage or less storage. We have had cases where, when memory and storage were cheaper a year ago or 18 months ago, customers asked for more memory. We worked with customers to change specs where appropriate. Some customers wanted changes, others did not. We have adjusted some products to support customers better and help them reach a price point that allows them to sell the product. We do see generational shifts: customers moving from DDR4 to DDR5, for example, and the pricing implications over time. We work closely with customers on whether to move to a new product or modify the existing one. One of the things we're proud of is that we can customize and modify quickly, enabling smooth transitions for customers.
That's really helpful. And with regards to your increased guidance on the balance of the year, you did mention that your inference customer and maybe your switch product is beginning to contribute. Can you give us a rough magnitude of how much these brand-new design wins secured in '26 are contributing to your end-of-year revenue?
For AI inference in 2026, the total number you can model for this year is in the range of $3 million to $4 million; that is roughly the number we expect for 2026. Obviously, 2027 numbers would be much higher. For the other design wins, some are ramping quicker and some take more time. Overall, design wins we announced in 2026 will probably not be fully mature or at full run rate in 2026; 2027 or 2028 are more likely years to be at full run rate.
Maybe lastly on this inference design win. I know there's a lot of excitement from investors about that. Can you maybe summarize some of the intellectual property and some of the advantages you have that contribute to that sort of design win in the AI inference domain?
For competitive reasons I'll be somewhat limited, but I can highlight fundamentals. We are focusing on the know-how Silicom has built over many years. We see two main areas of advantage. One is networking: everything we've built over many years, whether around FPGA, other ASICs, PCIe switches or related components, gives us deep understanding of architecture challenges and the ability to have productive discussions with customers about pain points. That enables us to propose and deliver solutions quickly because we have building blocks customers can test. The other area is compute, especially on the FPGA side, where inference on FPGA offers flexibility as models evolve. With FPGA you can update designs continuously; you are not locked down for years as with an ASIC. As models progress, you can integrate new improvements into FPGA and run models better over time. So it combines our core fundamentals with targeted solutions for AI inference.
The next question is from Greg Weaver of Invicta Capital.
Great quarter. Since the core business seems to be driving these results, can you maybe flesh out a little bit what's been a surprise in terms of how things have gotten pulled in? What's caused the acceleration that you didn't anticipate, say, six or nine months ago?
I would say there is no single customer or single industry driving it. It's the accumulation of design wins we had and won in the last 18 months, all of them ramping up. Some customers have been more successful than anticipated; some less. We see very strong demand from the design wins we accumulated over the last 18 months. Those won this year take more time, but those won a year ago are ramping very nicely. Also, we are usually conservative in guidance. We've seen hints of this growth, but now we definitely see it coming and our projections reflect that.
From a gross margin outlook perspective, obviously there are some moving parts here with some of this new business coming on and, say, some of this inference ramping. Do you foresee much of a change as a result?
We expect the same; we don't think it will change dramatically.
And just lastly, maybe if you could just address here for everybody on the call about the shelf. There seems to be a lot of consternation around that. Maybe just talk to that and what the thought process was there.
The filing is strictly standard corporate housekeeping. We like to maintain an active shelf to ensure we have maximum financial flexibility. Our focus right now is executing on the momentum as we're seeing it. If we experience higher-than-expected growth in our core business or see an opportunity to aggressively scale alongside the accelerating demand for our AI inference solution, this simply gives us the agility to support that working capital efficiently.
So I mean, you think you could buy that much inventory, or you need that much receivables working capital ramp that you'd absorb $50 million in cash you got on the balance sheet now in the next six months?
I believe so. If needed, it would potentially be for AI if it really ramps up to very high volumes.
There are no further questions at this time. Before I turn the call over to Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on Silicom's website, www.silicom-usa.com. Mr. Eizenman, would you like to make a concluding statement?
Thank you, operator. Thank you, everybody, for joining the call and for your interest in Silicom. We look forward to hosting you on our next call in three months. Good day.
Thank you. This concludes Silicom's Second Quarter 2026 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.