Silicom Ltd

Ladies and gentlemen, thank you for standing by. Welcome to the Silicon's second quarter 2026 results conference call. All participants were 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. You should have all received by now the company's press release. If you have not received it, please contact Silicon's investor relations team at ekglobalinvestorrelations.com 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 Silicon's second quarter 2026 results conference call. Before we start, I would like to draw your attention to the following safe harbor statements. 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 demands, 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 this U.S. Securities and Exchange Commission, including its annual report on Form 20F. The company undertakes no obligation to update any forward-looking statements. With us on the line today are 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. 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 Silicon's strong momentum, upcoming potential, and the trajectory ahead. The second quarter was an exceptionally good one for Silicon, and it marked 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 to $21 million guidance range we shared with you last quarter. Our strategic plan of the core business is tracking well ahead and of our original expectations from when we first launched the plan. Our highly predicted predictable platform of recurring revenue built on years of design with momentum combined with the upside from our growth engines 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 remarkably 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 to 95 million dollars up from our previous guidance of 82 to 83 million. This higher guidance reflects the better than expected improvements in our core business and is further supported by the additional multi-million dollar revenues that we now expect from AI inference production orders in 2026. We have discussed many times the long-term growth and strength of our core business, our best track 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 SmartNIC design win with a European leader in advanced encryption and secure communication solutions. The customers 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 PQC design win as we continue to build post-quantum cryptography as an emerging future growth engine for silicon. We expect to scale toward 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 SmartNIC, which is planned to launch in 2028, as well as potential full-system solutions combining a server with an FPGA SmartNIC, opportunities that could each add meaningfully to our future revenues from this account. A few weeks later in May, we announced our first-ever white-label switching design. This was a win with a $5 billion 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 Silicon's open white label solutions. The customer selected a full range of Silicon-designed white label switches as the networking infrastructure for its security platforms. First production orders are expected before the end of the year. And 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 supply relationships we have cultivated over decades of operation with Bluechip 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. 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 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 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 insurance 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's specific needs delivered the first unit to the customer 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 shifts decisively from training to inference. and the rise of disaggregated inference architectures is positioning silicon as a key player bringing our networking know-how and building blocks to the architectures that powered 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 silicon 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 equivalent, and highly rated marketable securities with no debt. In summary, This was an outstanding quarter and it's an exciting time for Siilicom. 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 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 extension of our core expertise, capabilities, customer base, and the same IP roots. We could not be more excited about Silicon'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.