Tower Semiconductor Ltd.

Good day, and thank you for standing by. Welcome to the TOWER Semiconductor Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 1 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 1 1 again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to our speaker today, Noit Levy, SVP, Investor Relations. Please go ahead.

Thank you and welcome to Tower Financial Results Conference Call for the fourth quarter and fiscal year of 2024. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors. that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Forms 20F and 6K, filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update any such forward-looking statements. Please note that the fourth quarter and fiscal year of 2024 financial results have been prepared in accordance with U.S. GAAP. The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commission. The financial table includes a full explanation of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures. We have a supporting slide deck that complements today's conference call. The presentation is accessible on our company's website and is also integrated into today's webcast for your convenience. Now I'd like to turn the call to our CEO, Mr. Russell Elwanger. Russell, please go ahead.

Hello, everyone. Thank you for joining our call today. During today's call, we'll provide our financial highlights for the fourth quarter and the fiscal year of 2024, reviewing strategic developments of the year, and outlining our vision for the future, including steps we are taking to ensure sustained growth, now having entered into 2025. Please find the 2024 financial details in the supporting slide deck. At the onset, and looking back at 2024, I take this opportunity to express gratitude to our employees for their dedication and hard work, to our customers and supplier partners for their collaboration, and to our shareholders for their continued trust and support. Together, we have built a strong company, enabling us to capitalize on the great opportunities that lie before us. We concluded 2024 with an annual revenue of $1.44 billion, a net profit of $208 million, and a fourth quarter revenue of $387 million, representing an in-year Q1 to Q4 revenue growth of 18% and fourth quarter to fourth quarter year over year growth of 10%. We guide the first quarter of 2025 to be a midpoint of $385 million plus minus 5%, which midpoint represents about 10% first quarter year over year growth. We target year over year growth for 2025 with sequential quarter over quarter revenue increases within the year. with an acceleration in the second half of the year as our capacity and investment continue to progress through customer qualifications with the ensuing production shipments. We will now present the 2024 revenue breakdown for our major technology platforms and the expected trend for 2025. Later in the call, we will provide summaries of the technical advancements achieved in 2024, which continue at this time, in order to not just maintain, but to grow these specific market shares. The revenue breakdown by technology and by end market application is shown in slides five and six respectively. RF infrastructure revenue was about $241 million, or 17% of our corporate revenue in 2024. In 2025, we target strong growth in the RF infrastructure revenue, quite significant, as this is on top of a near doubling in 2024 over 2023, with a more than tripling of SIFO revenues in 2024 to $105 million for that year. RF mobile revenue was approximately $418 million, 29% of our corporate revenue in 2024. After achieving strong growth in the segment in 2024 over 2023, we anticipate some decrease in RF mobile in 2025, mainly as a result in the present Android market as forecasted by our customers. However, within this context, we target growth in our more advanced 300 millimeter platform, signifying market share wins for us and our customers, promising continued growth as the market recovers. Power management and discrete revenue was about $426 million, or 36% of our corporate revenue in 2024, broken down evenly between IC and discrete revenue. Based on the current customer forecast, we target growth for the power management business unit in 2025 with the highest growth for advanced 300 millimeter platforms. Due to the impact of having discontinued FAB1 larger margin, I'm sorry, lower margin, legacy 150 millimeter activities, discrete business is expected to decrease in 2025 versus 2024. Sensor display revenue was about $221 million or 15% of our corporate revenue in 2024. Based on the current customer forecast, we target 2025 moderate growth for this business unit. Mixed signal and CMOS revenue was about $105 million or 7% of corporate revenue in 2024, targeted with moderate growth in 2025. Now we'll provide additional color for a major business platform. RF infrastructure. RF infrastructure was our fastest growing segment in 2024, riding on the mega trend of scale up and scale out of cloud computing and AI clusters. Even before the announcement of the Stargate program by the US president last month, several hyperscalers had committed to significant investments, driving strong demand for electronic and optical components that require advanced silicon germanium and silicon photonics technology. To that effect, our silicon germanium platform has seen rapid growth throughout 2024 and is forecasted to continue so in 2025. We take pride in being the founder of choice to leaders in this industry, building components such as CDRs, drivers, and TIAs for optical transceivers and pluggables, and retimers for active cables. While we have recently received a reduced forecast for active copper cable silicon germanium components, we have at the same time received upside orders for silicon germanium optical transceiver components, and as such, we see continued growth in silicon germanium without interruption. To support all customer growth in 2025 and beyond, we are bringing up our high-demand silicon germanium platform in both our San Antonio and Big Dolphemic factories, while adding incremental tooling to Newport Beach factories as part of our announced $350 million investment in capacity. In addition, we have released 300-millimeter silicon germanium PDKs in our WOZO Japan factories and have a lead customer already in product design. 300mm tools will add additional silicon germinating capacity at larger wafer form factors. Our silicon photonics platform continues to gain strong market share at 400G to 800G and is now in volume production at 1.6T. We are working closely with our partners including six out of top ten leading optical transceiver module makers in the world, of which the top two, mainly in the light and coherent, press released our multi-generation co-development partnerships. We highly value these customer partnerships, yielding continuous, world-leading, best-in-class technological advancements. To support the strong growth, we are bringing up our SIFO platform in our San Antonio factory, and have also released a full PDK for a 300 millimeter WOZO factory. 300 millimeter enables our SIFO customers to more easily address the future potential needs of CPO architecture that combine advanced SIFO technology with 2.5D integration of optical and electrical components. The added capacities mentioned for SIGI and SIFO are in various stages of customer qualification, with expected shipments and result in high value incremental revenues in Q3 and Q4 of this year. Finally, we continue to work with our customers to bring to market next generation 400 gigabit per lane technology targeting the upcoming 3.2T standard. To note, we have already demonstrated with a lead customer bandwidth consistent with the 400 gigabit per lane speed requirements needed for the 3.2 standard. We see further application of our leading CyG and SIFO technologies outside of the optical transceiver markets. For example, we announced our partnership with Renaissance in the emerging SATCOM market, where phased array ICs for terrestrial disk antennas built using CyG technology promise strong growth with the proliferation of satellite-based internet services. With SIFO, we are working with several customers in emerging areas of automotive, LIDAR, photonic space gyrometers, and photonic quantum computing. In our RF mobile market, despite some headwinds with weaker customer forecasts in 25 versus 24, particularly for Android-based devices, we see a strong positive trend towards higher end 300 millimeter RF SOI technologies, which not only offer improved performance to address higher performance markets, but also die shrinkage, allowing both tower and the customer to maximize margin. In addition to existing markets, we continue to invest in new technologies such as the triple play process announced with Broadcom for Wi-Fi 7, which offers industry leading integration of a power amplifier, low noise amplifier and switch onto the same die in the single die form factor to support high end Wi-Fi functionality hence a much smaller footprint than previously possible. Looking at our power management business, during 2024, we executed the transfer of our flagship advanced 65 nanometer BCD platform to Albuquerque to take advantage of the large capacity available to us as part of the previously announced agreement with Intel. In the fourth quarter, we delivered successful prototypes to lead customers, and based on the success, have received our first production PO, a major milestone achieved ahead of plan. We have extreme customer interest in these flows, well beyond what could be supplied in Mozu, Japan. Additionally, in Q4, we announced the release of our next generation 300mm power management platform, which promises as much as 60% lower conduction losses versus prior platforms, critical for power management ICs, used within lithium-ion battery-operated products, such as smartphones, tablets, wearables, a large and growing market, presently at about $6 billion. Turning to sensors and displays, there are several trends shaping this market that have given and continue to give impetus to our priorities and investments, among which industrial sensors are transitioning to 300-millimeter platforms enabling denser logics, smaller form factors, and higher resolution pixels. We demonstrated 100 megapixel and 300 megapixel high-speed global shutter stack sensors with 2.47 micron charge domain pixels. Medical and dental sensors, some 200 millimeter CMOS products are shifting to lower cost exo-platforms, while high-performance applications, mammography and extra dental x-ray, drive demand for 200 and 300 millimeter stitch seam off. Hence, our development activities in medical and dental are focused on next generation CT detectors, 200 millimeter extraoral x-ray, and 300 millimeter x-ray, including having released a 300 millimeter more cost-effective layer reduced lean flow PDK, enabling our customers to battle on price as well as with performance. OLED on silicon is a significant large incremental business growth opportunity for CMOS backplane for high resolution micro OLED displays known as OLED on silicon for AR, VR, and XR applications. Our expertise and long performance history and large format imagers position us as a leader. First OLED on silicon prototypes are targeted to ship second half of this year featuring unique ultra-low leakage transistors combined with high K capacitors. Looking at utilization, we are strategically repurposing certain capacities across multiple FADs to further enhance our CyG and CyFO capabilities. While this may result in lower overall utilization rate in the near term, there's a crucial step towards aligning our production with the evolving needs of our customers. By focusing on these advanced process technologies, we are positioning the company for sustainable long-term growth, ensuring we meet increasing demands. This initiative optimizes our production portfolio and underscores our commitment to innovation and fast execution to maintain market leadership in a rapidly evolving industry. In the fourth quarter, FabOne operated at 70% utilization with all activities now fully consolidated into FAB2. FAB2 and FAB9, where we are driving CyG and SYFL capacity activities, operate at approximately 55% utilization. FAB3 was at 70% utilization, FAB5 at 60%, and FAB7 300 millimeter at 90% founder utilization, with the highest process layers to date. Non-CAPEX projects are ongoing in FAB 7 to maximize shipments from FAB exchanges and with the agreement with NTCJ utilizing some of their capacity. To summarize, in 2024, we've shown our commitment to innovation, excellence, and growth. We've made significant progress and built a strong foundation for the future. Looking ahead, our investments and focused efforts are already delivering positive results, positioning us to target year-over-year growth with sequential quarter-over-quarter growth in the year. We are actively engaged in seizing new opportunities to grow our served markets and provide continued leadership. Thank you for your continued trust and support. We look forward to sharing with you our achievements throughout what will be an exceptional year ahead. With that, I turn the call to our CFO, Oren Shirazi. Oren?