Tower Semiconductor Ltd.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Tower Semiconductor Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. Then will be a presentation followed by the question and answer session, at which time, if you wish to ask a question, you will need to press star 1 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference has been recorded today. I would now like to hand the conference over to our speaker today, Ms. Noet Levy, Senior Vice President of Investor Relations and Human Resources. Please go ahead, Madam.

Thank you, and welcome to Towers' second quarter 2025 Financial Results Conference call. Before we begin, please note that certain statements made today may be forward-looking and subject to risks and uncertainties that could cause actual results to defer materially. These risks are detailed in our SEC filings, Form 20F and 6K, as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update forward-looking statements. Our second quarter 2025 results are prepared in accordance with U.S. GAAP. Some data presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to gap figures and full explanations are provided in today's press release and financial tables. Please note that we have a supporting slide deck that is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Elwanger. Russell?

Thank you, Noit. Thank you all for joining us today for our second quarter 2025 earnings call. We delivered strong results in the second quarter with revenues of $372 million and a result in net profit of $46.6 million. We got our third quarter revenues to be $395 million plus minus 5% and additionally target a $40 million plus revenue increase for the fourth quarter over the third. Q3 guidance and Q4 expectations validate our onset 2025 target of sequential quarter-over-quarter growth throughout the year with acceleration in the second half. We announced at year's begin a repurposing of multiple factories predominantly towards higher capacity for RF infrastructure, namely silicon germanium and silicon photonics. This is well underway with Q3 and Q4 expected growth being the first fruits of the execution of this strategy. Demand not only remains very strong, but is consistently growing, as is our increase in both silicon, germanium, and SIFO capacity and associated customer qualifications. We continue to invest in capacity and also R&D advanced capability CapEx throughout 2025, with further capacity and capability growth planned for 2026. aligned to our customers' forecasted demands, confident in maintaining our number one market share position in this growing and significant optical transceiver market. Let's review our second quarter 2025 revenue breakdown along with some context that highlights key trends and momentum shaping our performance for the full year. Kindly refer to slide number four for a detailed breakdown of our quarterly revenue figures. Most notable is growth in our RF infrastructure business, attributed to data center and AI expansions, served by our silicon photonics and silicon germanium technologies, predominantly for optical fiber communications. In the second quarter, RF infrastructure represented 25% of corporate revenues, over 90 million in revenues, up from 14% in the same period of 2024, and expected to significantly increase over the next period. Specific to silicon germanium, we began volume production shipments from San Antonio Fab 9 for a Tier 1 customer, and as well, volume wafer starts in Israel Fab 2 for another Tier 1 customer, providing substantial capacity increase in this growing market on top of the high capacity in our Newport Beach facility, which itself is realizing capacity increases this year. We have also made silicon germanium design kits available in our 300 millimeter Japan factory, Fab 7, for which an additional Tier 1 customer is presently in the design phase. For silicon photonics, in addition to our existing volume on 400 and 800 gigabit per second, current wafer starts now include a good ramp on 1.6 terabit per second as the industry continues to move aggressively to higher speeds, which is expected to further help market penetration of silicon photonics over legacy EML solutions, expanding our opportunity due to the cost and strong performance benefits of silicon photonics. In the first half of 2025, we've moved five times more SIFO products from pre-production to production phase than in the same period in 2024. already exceeding last year's total. This growth demonstrates our platform maturity, strong customer adoption, and efficient operational scalability. Today, most silicon photonics products we manufacture serve the transmit function in an optical transceiver module. This quarter, we successfully prototyped a new 300 millimeter silicon photonics technology that enables cost and performance advantage to the receive function in an optical transceiver module. This new technology is expected to see initial production in the fourth quarter of this year, expanding the market served by our silicon photonics technology beyond that which we serve today. By leveraging the majority of features in our mature SIFO platform and adding evolutionary customer-partnered improvements to this base process, we've been able to quickly ramp up and achieve high yields for 200 gigabit per second lanes 1.6 terabit per second optical transceiver products. The transition of 400 gigabit per second lanes, 3.2 terabit per second, requires additional and fundamental device, process improvements, and new materials, which Tower is aggressively pursuing together with Tier 1 customers. The first of these platforms is anticipated to ramp as early as mid-2026. Slide 5 shows cumulative wafer build to date for 400G, 800G, and 1.6T speed. Presently, we are manufacturing similar amounts of each offering. Looking at prototypes, there's further acceleration of 1.6T with 40% higher year-to-date protos at 1.6T above 400G and 800G combined, and this serving multiple large customers. We're seeing recovery in our RF mobile business, specifically in RF SOI, which showed a Q2 to Q1 revenue increase of over 20%, and is expected to show further increases, close to 30%, Q3 over Q2, and targeting further increase in Q4. We've gained momentum with a new North America Tier 1 customer, now prototyping several products on RF SOI in our 300 millimeter facilities in both Japan and Italy. Beyond RFSOI, we're innovating with other RF switch technologies. This quarter, we won the IMS Best Paper Award with PSEMI, a Murata fully owned company, for our PCM, phase change material switch technology, achieving a 15 femtosecond R-on-C-off figure of merit, being a Forex improvement versus state-of-the-art RFSOI. These switches are being prototyped for both low and high frequency millimeter wave applications. And importantly, this quarter received a Best Supplier Award from Weisval, a major Korean RF front end module provider. Looking at power management, the computational complexity of AI processors is increasing, leading to a corresponding rise in power requirements. To meet this need, as shown on slide six, We provide a variety of power management solutions with switch devices that have ultra low resistance, advanced digital logic integration, and manufacturing options in our 300 millimeter lines in the US and Japan. Lead customers are now designing to our high efficiency power delivery solutions for this rapidly growing market. We deliver best in class power transistor performance and continue to advance this offering, having released device optimization for higher switching frequencies this past quarter. For sensors and displays, we expect a revenue increase of about 20% in the second half of 2025 against the previous quarter's and previous year's run rate, primarily due to increases in the machine vision market. We have also begun substantial new activities with several customers, including a leading automotive imager provider and an OLED on silicon supplier the latter of which has prototypes already in test. These new activities are expected to fuel additional future growth. Looking at utilization, in the second quarter, Fab 2 in Israel and Fab 9 in Texas both operated about 60% utilization while repurposing tools to now load high levels of silicon germanium and to begin the manufacture of silicon photonics. Fab 3 is fully utilized at our 85% utilization model. Fab 5 was at 75% with rising demand for high voltage power management. And Fab 7, 300 millimeter, was fully utilized, well exceeding the 85% model. In summary, our business continues to advance with significant progress across key platforms. We are well positioned for continued growth and success in our target markets. We are successfully executing to a clear strategy that is translating into tangible financial results with expanding customer engagements and measurable operational progress. We are committed to delivering sustainable and long-term value to our stakeholders. With that, I'd like to turn the call to our CFO, Oren Shirazi. Oren, please.

Hello, everyone. Earlier today, we released our financial results for the second quarter of 2025. For the second quarter of 2025, we reported revenue of $372 million, representing $21 million, or 6% year-over-year revenue increase, compared to the same quarter in 2024, and a $14 million, or 4% quarter-over-quarter revenue increase, compared to the prior quarter. Gross profit and operating profit for the second quarter of 2025 were $80 million and $40 million, respectively, each higher than the prior quarter by $7 million. Net profit for the second quarter of 2025 was $47 million, also $7 million higher quarter over quarter, representing $0.42 basic and $0.41 diluted earnings per share. Financing and other income net in Q2 2025 was $14.4 million compared to $10.6 million in the prior quarter. This $3.8 million increase was mainly attributable to gain recorded as a result of zero-cost cylinder transaction we executed to hedge future foreign currency risk. In this respect, I would now like to describe our currency hedging activity. In relation to the Japanese Yen, since majority of TPS cost revenue is denominated in Yen and the vast majority of TPS cost are in Yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining Yen exposure, we are executing zero-cost cylinder transactions to hedge the currency fluctuations. While the yen rate against the U.S. dollar may fluctuate, the impact on our margins is limited. In relation to the Israeli shekel and euro currencies, while we have no revenues in such currencies, since a portion of our cost in Israel is denominated in the Israeli currency and a portion of our cost in a gratis fare in Italy is denominated in euro, we also hedge a large portion of such currencies' risk by engaging zero-cost cylinder transactions to mitigate exposure resulting from our missed and Euro-denominated costs. Under GAAP, the fair value of such transactions is recorded in the P&L, which drove the previously stated financing and other income net increase. Moving to our balance sheet and future capex and cash plans. Our balance sheet remains very strong as evidenced by the following indicators and financial ratios. As of the end of June 2025, our assets totaled $3.2 billion, primarily comprised of $1.4 billion in fixed assets net, predominantly comprised of FEB machinery, and $1.8 billion of current assets. Current assets ratio is very strong at about 7x, while shareholders' equity reached a record of $2.8 billion at the end of June 2025. Our strong financial position allows us to invest in strategic opportunities that support our corporate vision as follows. We have committed to pay up to $300 million to acquire equipment and CapEx in the 12-inch New Mexico Fed, 20% of which has been already paid, while the remaining 80% are forecasted to be paid as we ramp up capacity and technology qualifications over the next two and a half years. As part of our STMicro partnership, $500 million in cash is allocated for the Italy 12-inch FEB equipment. We've already invested 85% of it, while the balance is expected to be paid by mid-2026. In addition, for our high-margin CIFO and CIGI business, we announced plans to invest $350 million to expand our capacity in our 8-inch FEBs in Israel and Texas, and in our 12-inch in Japan. This CAPEX includes a large portion of capability CAPEX for advanced development and high-end RF technology-related projects. 40% of this amount has been paid to date, while the remaining 60% are expected to be paid by the end of 2026. All of these investments, including the Sci-G and Sci-4 CAPEX, are fully reflected in our previously presented strategic and financial model. Under this model, we target $2.7 billion in annual revenue at full loading of our existing feds, including Agrate and New Mexico, $560 million per annum of operating profits, and $500 million per annum of net profits. That concludes my prepared remark. Now I'd like to turn the call back to the operator so we can take your questions.

Thank you. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad and wait for your name to be announced. Please stand by, we'll compile the Q&A queue. This will take a few moments. If you wish to cancel your request, press star 1 1 again. And now we're going to take the first question. And the question comes from Cody Acree from Benchmark Company. Your line is open. Please ask your question.

Hi, Cody. Yeah, thanks, guys. Hey, guys. Hey, Russell. Hey, congrats on a great quarter and a great year, it looks like, shaping up so far. Maybe if I could just start with, could you give a little more detail on what segments you expect to contribute and maybe rank order them for your sequential growth through the second half of the year?

So first and foremost is infrastructure as far as quarter over quarter deltas and absolute numbers. So the silicon germanium and the silicon photonics. We had stated at the year's onset that on SIFO we had had what, circa 105 million revenue. in 2024, and we expected a doubling of that in 2025. That's definitely within the second half targets that were given, maybe, you know, higher than a doubling. So that's a very important segment for us. And maybe, I don't know, in some summary comments, I might give some more color on what the capacity increases that we're doing there, what that could result in in increases against what we're targeting in the fourth quarter of this year. But that's the biggest. Our power management, we're expecting still strong contributions. I mentioned that in the imaging, there was an over 20% increase in the run rate of 2024 in the first two quarters of 2025 in the second half, at least from what we target right now from our customer forecast, and that mainly due to increase in machine vision. So those are the areas of growth, but very important on a rebound is the weakness that we had cited previously in RF-SOI for front-end module for mobile. That has seen a nice increase from Q1 to Q2. And we're guiding an even stronger increase in the third quarter. So, you know, the biggest, again, being infrastructure and RFSOI for mobile, power management continuing strong, and CIS adding to it as well.

Well, it sounds like a good strength across the board then, Russell. Congrats. Would you then say, would you consider yourself now fully booked through the end of the year? And if so, do you have any available capacity to support any near-term turns business that could provide any yet upside to your estimates?

We had mentioned a 60% utilization in FAB 2 and in San Antonio FAB 9. We certainly have room there for immediate upsides, but the biggest portion of both of those FABs is focused on utilizing the additional CyG and CyFO capacity that we've built there, which is to an extent, in our hands, to an extent, rests on completion of customer qualifications, but that's within the numbers of the expectations that we have. So we see those utilizations increasing, but as we're doing that, there is room to handle immediate upsides. One of the really, I think, unique features of Tower is that we have a very strong worldwide manufacturing footprint where we're in Japan, we're in multiple sites in the U.S., we're in Israel, and we're in Italy. And by definition, we cross-qualify all of our flows. So as there continues to be questions geopolitically and People get concerned a little bit here or there about tariffs and impacts of tariffs. We have the ability to move customer demands from one factory to another. One of the strong reasons of moving silicon photonics in SIFO, both and especially SIFO being very, very high margin value add products, is firstly to have added capacity, but secondly to be able to serve customers depending on their needs of where to ship products from. So I think we've seen some immediate-term business, especially in the Tanami Fab 5 in Japan, in the power, and we're open to get more. But fundamentally, where we're focused at this point is meeting a very strong, consistently growing demand for the infrastructure, the SIFO and the SIGI. Hopefully that answered your question, Cody.

It does, Russell. Thank you very much and congratulations on progress.

Thank you.

Thank you. Now we're going to take our next question. And the question comes from Richard Shannon from Craig Hallam Capital Group. Your line is open. Please ask your question.

Hi, Richard.

Hi, Russell. How are you? Congratulations on some nice numbers again.

I'm doing good, but it depends on your question. Okay.

Well, let's see. I think I'm going to ask one on silicon photonics. You made an interesting comment about in the past supporting transmit functions and now supporting or prototyping, I think you said, for some stuff on the receive side. So I'd love to understand a little bit more about that, but also maybe just kind of look at the bigger picture here about what you're expecting in terms of content, both the maximum amount as well as kind of expected growth in content over the next couple of years in silicon photonics, please.

So for the specific receive function that we're doing now, we think, and it's for a specific application. I don't want to get into the details here because some of it really, it's not just what we're doing with the customer, but sometimes speaking too much can give other people hints as to what you're doing and why. But it's a specific application of receive function that we've been able to very, very innovatively address with SIFO in an extremely high-performance, cost-effective way, we think that it would add about 20% to our served market, plus minus, for this specific application in receive. As far as the demand that we're seeing, in Talking about our growth, which we have many times, the fourth quarter we would expect very high amounts of silicon photonic shipments. We're probably seeing from our Q4 expected shipment level in SIFO by customer demand at the end of 26 a doubling of demand, a doubling of what we would have to be supplying in capacity.

Okay, fair enough. That's one way to look at it. I appreciate those comments. My follow-on question, Russell, is in the RF mobile space here. I guess the way I'd like to think about this is to what degree are we seeing this improvement both in the second quarter, and I think you're talking about the third quarter at least, or potentially second half here. about this improvement here. To what degree is this cyclical like inventory replenishment and or share gains here? And to what degree does that play into your comment from last quarter about seeing some strong growth in ARC Mobile in both 26 and 27?

Thank you. I don't see the 20% growth that we had Q2 over Q1. and the 30% that we're targeting in Q3 over Q2. Cyclicality, it's hard to speak about cyclicality, but certainly it's related to inventories having been consumed that had been a function of the very strong 2024. We also have multiple customers that themselves are growing their market share. So that's one way that one can always outdo a market trend is by serving customers that they themselves are growing their market share against others that you might not be serving. So the Q3, Q4 numbers that we're looking at, I think that they're just very basic share gains that we have and our customers have. Some of what we would be expecting in The latter half of Q3 and Q4 deals with an existing customer that we've had for a long time that has just recently increased their forecasts and their POs. What has driven that, I honestly don't know at the moment. They're POs that have come in just recently.

Okay. Thank you, Russell.

Thank you. Now we're going to take our next question. And the question comes, Lan, of Matthew Hosseini from Susquehanna Financial Group. Your line is open. Please ask your question.

Thanks for taking my question. I have two. First one for Russell. I want a better understanding of the big picture, especially when it comes to data center infrastructure. We are migrating from copper to pluggable and at some point migrating to package optic. And what I want to better understand, Russell, is how do you see your customers evolving? And in that context, how are you actually planning for capacity in a sense that to avoid a double, in a sense to avoid too much capacity come online because there's also a convergence among the customers? So the transition in technology from copper to pluggable and eventually to co-package and how the mix of customers evolving and how that impacts your capacity planning. And I have a follow up.

The first part of your question, I don't really fully understand. I think that pluggables have been the mainstay for multiple years. I don't see it being in any competition with copper. So pluggables have been the mainstay. They're maintaining the mainstay. The major thing for SIFO is the movement from an EML solution that's been the mainstay solution to a SIFO solution. So that's the difference there. I don't really follow the copper statement. But certainly a lead customer that we have at 1.6T has decided to do everything with SIFO versus EML because of two functions of the SIFO, one being cost, which, you know, the ability to not have to do separate indium phosphide modulator laser. It's a very, very complicated process and very expensive to have the modulator being made in the SIFO chip. as well as integration of all the passes. So it has a strong cost benefit, but they also noted a very strong performance benefit at 1.6T, and that's because of integrating everything onto the PIC. I would, and I had said that in the script, we see this 1.6T where there's both a cost and apparently a performance benefit as being a big drive that will converge more into SIFO from EML. Presently, what is the percentage of SIFO versus EML? I couldn't tell you exactly what that is. I know that our demand for SIFO is strong and continues to grow, and to grow very strongly. And at the 1.6T, it seems to be even stronger. Well, it doesn't just seem it is. As we move to 3.2T, Stated we are working with lead customers on producing the capabilities there, which requires to do a 400 gigabit per second modulator. It requires different materials, and we're very advanced on that, pursuing two different material types. So I see the pluggables staying very strong for a good period of time. There are those in the industry that question if CPO will ever really come into the market. I'm not saying it won't. We have our own strategy for CPO, and I think we're pursuing it fairly well. But CPO, if it comes in, should it come in, probably is not until 2930. And everything we do with CyG and everything we do with CyFO will still be in demand. So I don't see it being something that would discount that.

Great. And thank you for clarifying my question. Actually, as a follow-up to it, I want to understand how integrating the modulator into your process technology is perhaps helping you with incremental revenue per wafer. Is that how we should think about it?

For SIFO, the modulator is always part of the PIC. So we're going from using our capabilities for the photodetector and the modulator, where we have strong capabilities in germanium and silicon, obviously, to being able to provide that as part of the PIC. And that is one of the benefits of silicon photonics itself. That's one of the big drives of it. Otherwise, you're doing things in indium phosphide outside, and as I stated previously, the process to make the indium phosphide modulator in addition to the laser, it's a very complicated process because it's different layerings for both that are done together. So it's many photo steps, masking steps, and growths. If that answers your question, I'm not sure.

Yes, absolutely. Actually, I want to highlight, I want to make sure I understand, the indium phosphide alternative that one or two of your competitors are highlighting has a cost disadvantage and your solution is more cost-effective, right?

Yes, I believe so. But most of our customers still use an EML solution, right? It's a question of that they're also turning to SIFO for certain speeds, and it appears that the SIFO adoption is only growing at 1.6T. and I believe will be stronger beyond.

Okay, great. I'll go back into the queue.

Thank you. Now we're going to take our last question for today, and it comes from Lisa Thompson from Zacks Investment Research. Your line is open. Please ask a question.

Hi. Thank you for taking this. I'm looking at the numbers, and it really seems like RF Mobile has come roaring back. Do you think between RF mobile and RF infrastructure, they're both going to come in pretty much the same for the year, or can mobile even beat that?

Let me take a look. Now, infrastructure will be substantially bigger, but the mobile is a good size. Understand for infrastructure, it's two different products that we're serving that both serve it, right? It's the CyG for drivers and TIAs, and in some cases still for CDRs, and it's the CyFO for the PIC. So it's two different products that are both needed. And for the RF SOI, and we're also doing some just plain RF CMOS for controllers, but the bulk of it is RF SOI. So now the infrastructure is bigger. But the mobile numbers, if we look at Q3, Q4, they're very high run rates, similar to past years.

That's great. Now, if you had to describe why it's come back so much, is it just specific customers or is it the market?

I think a combination of both. As stated, we have customers that they themselves are going market share. against their competitors that, in some cases, we do not serve. So that's always a big thing when you're increasing your share of market. And I stated it at the beginning of the year. We had seen, I think not just us, but many people saw a pullback in mobile for the fact that 24 had been a very big growth year in mobile. Nobody wants to short ship their end customer for the fear of losing SKUs, so they build up more inventory than is needed, not knowing when there would be a glut, so to speak, and that's how you have inventory corrections. So the beginning of the year certainly saw an inventory correction. From everything we're seeing now, it appears that most of that inventory has been eaten up.

Okay, thank you. Oren, one question for you. On other income, you keep saying that the number is going to fluctuate, but yet it's steadily increased for the last year and a half. Should we expect it to continue to increase?

No, I think we had a good gain here, like I mentioned in my preferred remarks, that caused the majority of the $3.8 million increase. which is good in financing another income net. From the 10.6 we presented last quarter to 14.4 this quarter. I think the number we should expect in the future is same like the baseline of the 10.6. This was a gain from movement in this quarter, but one cannot predict the future, so I would use the same baseline, which includes all the numbers without any exceptional items or one time, 10.6.

Okay, great. Thank you so much.

That's all my questions. Thank you. Now we're going to take our next question. And the question comes, Lan, of Richard Shannon from Craig Hallam Capital Group. Your line is open. Please ask a question.

Great. Thanks for letting me ask a couple of follow-on questions here. Russell, one for you here. Back in the third quarter call of 23, you set out this framework from a revenue and margin or profitability perspective. I guess I have two questions to this. How do you think you're tracking so far, almost two years into this, in terms of the margin profiles here, both at the gross and EBIT line here, and then Maybe I'll try to stretch you here to see if you'll respond in any way here, but how do you think about a timeframe for hitting this revenue goal? Any thoughts you would give us?

You're referring to the model of the $2.7 billion?

That's correct.

On a margin perspective, I think we're probably outperforming from everything that we're doing. On a timeline to the $2.7 billion, it's You know, candidly, we were always looking at somewhere at 28, 29 to be there, and I think that's still what our targets are.

Okay, great. That's helpful. My follow-on question is probably for Oren here. Oren, I'd love to get a sense of any way you can quantify this as well, if possible, thinking about how we should see depreciation grow here as we're adding CapEx here, and then as kind of the core layer of the question here, thinking about pre-cash flow. Obviously, you're going to be negative here with a strong CapEx investment. How do we think about next year? Is this going to be positive, nicely positive? Just any way you can characterize it would be great. That's all for me.

Okay, so depreciation. Actually, you can see that in one of the tables that we attached to the press release, there is a line which is attached to the cash flow called depreciation amortization, which includes RSU amortization, but the amounts are listed there as above. 65-70 million dollar a quarter we expect those levels to remain pretty much the same maybe slight increase because like you mentioned the incremental capex are on the one hand increasing depreciation on the other hand there is depreciation that goes out of the books because of investments that were in the past your point is valid that the capex currently is higher than in the past and So depreciation should go up slightly, but most of that is fixed costs, and I don't believe it should go more than the $70-75 million per quarter that we present. As far as free cash flow, yeah, in the last few quarters, we see the same pictures that the cash flow operations, which is very good, is similar numbers to the CAPEX. And this is because of the total of $1.15 billion in capex that we announced, the $500 million Agrate, the $300 million 11x, and the $350 million CyphoCyG capex. So this $1.15 million is supposed to be, I referred to that in my prepared remarks, supposed to be still paid in the coming two, two and a half years. about more than 500 million of that was not paid yet. So this will be part of the capex in the rest of 25 and surely 26 and some of that in 27. So I would expect the capex total level per quarter to remain like now, maybe slightly go up. So to be between 100 to 120 a quarter, which is like now. However, the cash flow operation is supposed to continue its positive trend and improve as we go up on the revenue, which Russell mentioned the mid-range guidance, which is $3.95 and the target for Q4 even higher. So obviously cash flow operations will be higher when CapEx is supposed to remain in those levels that already reflect the new plans of $1.15 billion.

Okay, great. Thanks for all that detail, Oren. That's all for me.

Thank you. Now we're going to take our last question for today. And it comes from Magdi Hosseini from Susquehanna Financial Group. Your line is open. Please ask your question.

Yes, two follow-ups. One on OPEX. Should I assume that OPEX in 2025 would trend flat to up? on a year-over-year basis? Is that a fair assumption, or do I have a follow-up?

Yes, yes. We consider that fixed cost, and OPEX should remain flat at the current run rate of about $40 million a quarter.

Okay. And then, going back to the previous question regarding cash flow, you've actually done a good job of funding the CapEx and actually maintaining a stable net cash per share. Is there any plans for the cash, or should I just assume that you would rather be conservative and just accumulate cash beyond funding the CapEx? Any additional thoughts you can share with us?

Yeah, like you mentioned, the destination that we believe for our cash is for CapEx growth. which is why we approved in the last few years the $1.15 billion cap expense for the Intel Feb, for the Agrate Feb, and for the Cypher and Cygis, a total of $1.15. And we believe that's the best returns for the shareholders, that we invest in CapEx and see the revenue growing like Russell described. It's amazing growth this year. quarter over quarter, and that's the purpose that we plan for our cash. Okay.

Thank you.

Thank you.

Thank you. The speakers have no further questions for today. I would now like to hand the conference over to Russell Elwangde for any closing remarks.

Thank you. Really, to everyone on the call, thank Thank you for your interest in the company. Thank you for the good questions that were asked. We did deliver a good second quarter. We guide a strong third quarter with a target of an even stronger best ever revenue fourth quarter. Spoke to some length and there were some questions about increases in our silicon germanium and silicon photonics capacity. The third and fourth quarter are expected to begin to see the benefits of these activities. But I wanted to kind of frame what can be expected as all of this capacity that's coming online is qualified and shipped. The end state capacity, which should be realized in the second half of 2026, will be a capacity that is 33% higher in silicon germanium and 2.2 times larger in silicon photonics than the fourth quarter 25 targeted shipments, which Total revenue is targeted to exceed $435 million. Very importantly, these increases in capacity track well with our customers' forecasted demands. So I think for us, a very strong story. We believe that the markets that we chose to work in were, are, and continue to be the right markets. Our models, I think, are strong and the incremental revenue to margin net profit ratios are good and will continue to grow. So I thank everybody for their interest in the company. It's been extremely exciting. There's multiple activities that we're involved in in the next quarters. I wanted to just mention some of them. And in the short term, we would hope to see you at some of these conferences. We're excited to host our 2025 Technical Goals of Symposium in China this September, and in the US in November. TGS, this global symposium is our flagship technology event, bringing together customers and ecosystem partners. serving as a critical platform for showcasing our specialty analog platforms from SIFO, CIGI, RFC MOS to power management and imaging, while aligning on future roadmaps and enabling stronger co-development partnerships. We'll be participating in the following conferences and truly look forward to meeting and engaging with all of you at these events. On August 20th, we'll attend the sixth annual Needham Virtual Semiconductor Semicap One-on-One Conference, August 26th, we'll participate in the Jefferies Semi IT Hardware Comms Technology Conference in Chicago. On August 27th, we'll attend the 2025 Evercore ISI Semiconductor IT Hardware and Networking Conference in Chicago. On September 3rd, we'll participate at the Benchmark 2025 Tech Media Telecom Conference in New York. And on September 10th, we'll attend the Jefferies TechTrack 2025 Conference in Israel. Again, very much appreciate your interest in our company. Look forward to providing you with updates on our progress towards achieving our long-term goals in the coming quarters, and in the very short term, updating our achievements in Q3 and Q4. Thank you very, very much.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.