Silicom Ltd

Ladies and gentlemen, thank you for standing by. Welcome to the Citicom first quarter 2026 results conference call. All participants are at 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. If you have not received it, please contact Citicom'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.silicon-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 Silicon's quarterly results conference call. Before we start, I would like to draw your attention to the following state of the statement. During this call, we may make forwarding statements within the meaning of applicable security 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 solution, financial outlook, revenue expectations, margins, operating expenses, profitability, and future growth objectives. These statements involve risks and uncertainties that could cause actual results to materialize 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 findings with the U.S. Securities and Exchange Commission including its annual report on Form 20-S. The company undertakes no obligation to update any forward looking statements. I am the president and CEO of Iran. Iran will begin with an overview of the results, followed by Iran will provide the analysis on the financials. We will then turn the call over to the question and answer session. And with that, I will now hand the call over to Liron. Liron, please go ahead.

Thank you, Connie, and good day, everyone. I'm exceptionally pleased to share a truly excellent set of quarterly results, well ahead of our expectations. Over the next few minutes, I look forward to discussing why we are more excited than ever about Silicon's momentum and trajectory ahead. The first quarter of 2026 has been an excellent one for Silicon. Our core business has now reached a clear inflection point with extraordinary momentum in financial performance well ahead of the expectations we shared with you only a few months ago. The highly successful implementation of our strategic plan is clear and our business is decidedly outperforming on all fronts. Revenues this quarter came in at $19.1 million, representing a year-over-year growth of 33%, significantly ahead of our guidance range, which had originally expected an 18% year-over-year growth at the midpoint. This is the second quarter in a row of very strong improvement, with both quarters well ahead of our regional expectations. This quarter, even more so, we have seen a powerful upward inflection, with the year-over-year growth accelerating significantly and essentially doubling from 17% last quarter to 33% now. Not only did we suppress our revenue expectations this quarter, but our momentum continues to accelerate, and looking ahead, we anticipate even greater achievements for the second quarter. We expect second quarter revenues to range from $20 to $21 million, representing accelerated 40% growth on a year-over-year basis at the upper end of the guidance. Given the strong improvement in visibility we now have into the remainder of the year, we expect full-year 2026 revenues to be in the range of $82 to $83 million, representing an approximate 33% year-over-year growth. This exceptional performance is a direct result of the design wins achieved in previous years and the ongoing discipline execution of our strategic plan. As those design wins ramp, we are seeing strongly expanding revenue contribution and materially improved visibility for the remainder of the year. We are seeing equally impressive traction on the design win front. As you recall, we set ourselves a target of between seven and nine design wins for 2026, We are only third way through the year and we have already achieved four. Halfway towards our target which puts us on track to meet and possibly exceed the upper end of this target. Design Wins we achieved today will be the foundation for continuing strong growth into 2027 and beyond. I want to spend a few minutes focusing on some of the recent Design Wins we have achieved since the start of the year. At the start of the year, a global networking and security as a service leader expanded its deployment of silicon mesh devices into multiple additional use cases, more than doubling our expected annual revenue from this customer, from around $4 million to between $8 and $10 million, with some of the incremental revenues already flowing through this quarter. This achievement highlights both the strengths of our blue-chip customer relationships and our strategy of growing by expanding existing engagements alongside winning new ones. In February, a T1 cybersecurity customer, a longstanding partner, selected one of our aid systems as the platform for their next generation high-end product lines. To date, we have received initial orders of over $1 million for 2026, and we expect this engagement to double that. We are in discussions for additional product lines at this customer. This DesignWin is another great example of how our long-term customer relationships generate additive revenue contributions across our product portfolio over time. In March, we announced the DesignWin with one of the world's largest streaming service providers, which selected our high-speed networking adapter for deployment across its proprietary streaming infrastructure. We've already received an initial order for over $1 million, with total purchases over five years expected at $12 million. In parallel, we are in active discussions with the customer about a customized special form factor network adapter for the same infrastructure. If this materializes, it would more than double our networking-related revenues from this customer in the region of $25 to $30 million. In April, we announced a $3 million per year design win with a European leader in advanced encryption and secure communication solutions. After a successful evaluation, they selected an FPGA SmartNIC for deployment that includes post-quantum cryptography among its use cases, marking our third post-quantum cryptography design with to date and a key expansion of our PQC customer base. We have initial commitment of $1 million and beyond this, we are in active discussions about the next generation higher speed FPGA SmartNIC as well as a potential full system solution combining a server with an FPGA SmartNIC. opportunities that could meaningfully expand the partnership. Those four design elements demonstrate the breadth and the quality of our momentum across all our core product lines. Beyond the design we've already secured, our pipeline of opportunities is broader and deeper than it has ever been. It spans all our core product lines, ad systems, smart links, and FPGA-based solutions. and includes leading as well as fast-growing names across cybersecurity service providers, networking, and other key verticals. We expect part of this pipeline to continue to convert into design wind over the coming quarters, providing the foundation for accelerated growth in 2027 and beyond. While the return to strong growth within our core business is the main story, we continue to invest in three venture-style upside opportunities we spoke about last quarter. AI inference, post-quantum cryptography, and white label switching. I stress that we are not pursuing those opportunities to replace legacy core business. Quite the opposite. Those growth opportunities are edited. It's precisely because our stable growing core business is performing so well that we have the platform, the relationships, and the balance sheet strength to invest in those new growth engines, all of which leverage our IP and the same engineering talent that drive our core today. As I discussed last quarter, AI infrastructure investments are undergoing a fundamental shift from training models to querying the models at scale, known as inference. This shift is being dramatically accelerated by the rise of agentic AI, where autonomous agents generate continuous, high-volume inference workloads on behalf of users rather than the occasional single query of traditional chatbot interactions. A single agent completing a task can trigger hundreds or thousands of inference calls, and enterprises are deploying those agents across every function. The result is that the inference is rapidly overtaking training as the dominant driver of AI infrastructure spend, creating massive networking and interconnect bottlenecks at unprecedented scale, and that's exactly the We are making significant progress with two of the world's most promising contenders in the high-stakes race to architect the future of AI computing. Furthermore, we recently stated, started, in cooperation with a customer, the development of a new inference-specific product. We will share more details as those engage in progress. We view our rapid progress and expanding footprint in this high-growth sector as a potential game-changer for Cisco. This is an exceptionally exciting and transformative time at Silicon. Our core business is accelerating at a remarkable pace, delivering 33% growth in the first quarter with the potential for even stronger growth in the second quarter, positioning us currently on track for a very strong four-year performance. Our design win engine is firing on all cylinders, with four already achieved out of our 729 target for 2026. putting us well ahead of our plan and giving us increased confidence in our ability to meet and potentially exceed our targets. Our pipeline across AI systems, smart things, and FPGA solution is the strongest and most expensive we have ever seen. Combined with our robust balance sheet, this gives us exceptional flexibility to invest aggressively in both our core growth and our high potential venture-style opportunities. all while maintaining a disciplined and conservative financial profile. We are very excited about Telecom's strong and accelerating momentum in 2026 and are moving aggressively and with confidence to fully capture the opportunities ahead. We are highly optimistic about its significant value. We are building and 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 Iran for a detailed review of the quarter results.