Tower Semiconductor Ltd.

Good day and thank you for standing by. Welcome to the Tower Semiconductor Second Quarter 2026 Earnings Conference Call and Webcast. 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 automatic message advising your hand is raised. To withdraw a question, please press star-1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Noit Levy. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us. Welcome to Tower Semiconductor's second quarter of 2026 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, Chief Executive Officer, and Mr. Oren Shirazi, Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and are subject to risk and uncertainties that could cause actual results to differ 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 2026 results are prepared in accordance with U.S. GAAP. Some data presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliation to Gap Figures, and Full Explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck 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 Ellwanger. Russell?

Hello, everyone. Thank you for joining our call today. I'm truly excited to share with you the status, progress, and Future Outlook Potentials for Tower. The second quarter was quite significant, setting substantial company records across all key metrics. These results continue to validate the growing value of our technology portfolio and the powerful operating leverage embedded in our business model. Our revenue is on a fervent growth trajectory with an accelerated flow through into earnings. Second quarter revenue was $460 million with a particularly positive profitability, 30% gross margin, 20% operating margin, and 20% net margin, all being company records excluding non-recurring accounting items and representing respectively 58%, 55%, and 55% quarter-over-quarter contribution from the increased revenue. These results stand as the first step of continual margin expansion we expect over the next years, driven by market-leading customer partnerships, which dictate a very rich product mix backed by strong operational execution. Looking ahead, we guide the third quarter of 2026 mid-range revenue to be $520 million representing an annualized revenue run rate of above $2 billion. We began the year stating that Tower will have a very strong second half as the previously announced capacity investments become qualified and converted into shipments. Beginning the second half of 2026 with a $2 billion run rate turns the page into multiple new exciting chapters for the company. The strength of our customer demand, our growing partnerships, our proven execution capabilities, and the strategic investments that we have and still continue to announce provide a powerful catalyst to accelerate our short, mid, and long-term growth. Due to direct and growing customer demand, representing the scale of the market opportunity, and more importantly, our ability to capture it, we have updated our 2028 model to be 3.6 billion in revenues, 1.63 billion in gross profit, or 45% gross profit margin, and 1.2 billion in net profit, or 33% net profit margin. Please see slides four and five. Very important, the profitability gains we delivered in the second quarter are not a one-time achievement, but rather just an initial step towards profitability expansion and cash generation as represented in our updated 2028 model. Equally important, as can be seen in slides four and five, this growth is accompanied by even greater efficiency. Today, we operate at about a 10 percentage point difference between gross margin and operating margin. A highly efficient structure for a company investing strongly in future growth. As revenue expands, we drive greater efficiency with operating expenses as a percentage of revenue lowering to approximately 7%, 30% lower than current levels. This improvement is not the result of limiting investment in R&D, to the exact opposite. The model includes an increase of R&D investment by over 40% against present levels. Rather, this improvement reflects the enhanced efficiency achieved through our support functions as we grow scale. Speed and execution are one of the primary differentiators for high-tech success. We must continue to invest in R&D. This is a core capability. But as well, there must be a focus to streamline context, all of the SG&A functions. We are doing this, and likely with numbers that rival or exceed the otherwise best in the industry. Efficiency, driving the speed of execution, of course yields strong margins. But more importantly, it enables sustained business success through the speed of execution. Three weeks ago, We announced a dual-track 300mm capacity strategic expansion in Japan for our silicon photonics, silicon germanium, and advanced optical packaging capabilities, having gained the support of the Government of Japan through the Ministry of Economics, Trade, and Industry . By combining tower's specialized technology leadership and our best of the best worldwide workforce, into Japan's unparalleled manufacturing expertise and quality output, its world-class research institutions, and deeply committed workforce. We are building a strategic platform that will drive innovation, economic growth, and semiconductor leadership for decades to come. Track one of this dual track adds significant new 300-millimeter silicon photonics capacity with full production readiness expected during the fourth quarter of 2027. It consists of repurposing the Arai facility, formerly FAB 6 for 300 millimeter silicon photonics capacity and advanced packaging capabilities, and as well maximizing the company's FAB 7 300 millimeter output in Wosu. This track one is the driver for updating the 2028 business model. Track 2 will commence in parallel with the first track and consists of constructing an additional 300 millimeter manufacturing facility adjacent to Fab 7. This facility is expected to provide a 4x increase in our Japanese 300 millimeter manufacturing output, focusing on silicon photonics, silicon germanium, and related advanced optical packaging, positioning tower to continue to support are accelerating customer demand for emerging AI and data center applications, driving next generation optical connectivity requirements, and is planned to provide a seamless path for Tower and our customers for continued growth post-2028. Moving to our businesses, please refer to slide six as reference for Q2 revenue breakdown. Our RF infrastructure revenues for the second quarter represented 49% of corporate revenue, with approximately 43% of quarter-over-quarter growth and over 140% year-over-year growth. Silicon photonics revenue itself increased by over 60% quarter-over-quarter and over 270% year-over-year, hitting a Q2 annualized run rate of over $680 million, targeting a $1 billion run rate in Q4-26, as the previously announced capacity expansion continues to be qualified. The full ramp of wafer starts in these investments is anticipated to occur within the fourth quarter of 2026, creating a wafer start capacity over three times higher than the second quarter silicon photonics revenue shipments. with full financial effect anticipated to be in the second quarter of 2027. After kicking off the year with several breakthrough technology milestones, the second quarter was about further propelling Tower's leadership position in silicate photonics as an added foundation to the next phase of growth. We focused on expanding capacity, advancing our technology capabilities, and deepening our engagements with strategic customers aligned to their long-term roadmaps. The data center industry is undergoing a fundamental transformation as AI performance is no longer defined solely by compute. It is increasingly determined by how efficiently data moves between processors. High bandwidth, low latency, energy efficient optical connects have become a critical enabler of AI infrastructure. while geographically distributed deployment has become equally important to hyperscalers and the communities. These trends align directly with tower's core strengths. As AI clusters scale from thousands to hundreds of thousands of XPUs, electrical interconnects are rapidly approaching their practical limits. Silicon Photonics has emerged as the leading platform for 800G and 1.6T pluggable optical interconnects which have, for the most part, already replaced copper for scale-out connections outside the rack. The next frontier is enabling optical interconnects for scale-up, either within a single rack or across multiple racks. And once again, Silicon Photonics with Tower is well-positioned to lead this transition with several near-package optics, NPO deployments planned over the next year, and many more in design. NPO delivers much greater bandwidth density at reduced energy per bit compared to pluggable optics, and yet it leverages the same established ecosystem as pluggables, overcoming the reservations from hyperscalers and data center operators about reliability, serviceability, or multi-source flexibility. We announced customer contracts representing approximately $1.3 billion of silicon photonics revenue for 2027 with even higher growth for 2028. With what we've stated about Track 1 investment, substantial additional 300mm capacity will be added throughout 2027. This added 300mm capacity is already requested by and committed to several lead customers, reflecting their confidence in Tower's ability not only to scale manufacturing capacity rapidly, but to continue to execute on highly differentiated technology roadmaps required for future networking architectures. To support the long-term growing demand, we announced a Track 2, a most significant expansion of our manufacturing footprint in Japan, which is expected to more than quadruple its 300mm capacity, positioning tower well to support not only today's workhorse pluggable optics, and our rapidly growing near package optics, but also the additional future market for co-package optics. Capacity alone, however, is not enough. Our future growth will also be driven by the next generation of enabling technologies that are already moving through development pipeline. Over the next one to two years, we expect several of these technologies to transition into high volume manufacturing, including and especially heterogeneous integration of III-V materials on silicon photonics for integrated lasers, advanced modulators, and optical signal processing. In support of this roadmap, we enter into a multi-year epitaxial wafer supply agreement with IQE, securing a strategic supply of III-V epitaxial material while continuing to internalize key manufacturing steps that enhance both performance and supply chain control. Our long-standing collaboration with Marvell reached an important milestone as the number of SIFO-based coherent optical modules crossed over into multi-millions. This achievement demonstrates Tower's ability to manufacture some of the industry's most complex silicon photonics ICs at high volume production scale. Looking ahead, coherent photonics is expected to play an increasingly important role in scale across AI architectures, where multiple data center campuses operate as a single AI factory while distributing power, cooling, and infrastructure requirements across geographically diverse locations. Our silicon germanium business continues to benefit from growing demand for low latency, low power, efficient analog drivers, and transimpedant amplifiers across traditional pluggables as well as linear pluggable optics and linear receive optics architectures. Our 100G per lane and 200G per lane products are in high volume production across all three 200mm fabs as we advance towards near package optics as well as 400G per lane solutions requiring tighter electrical IC, photonics IC integration and co-design. We're also seeing strong customer pull for our next generation 300mm silicon germanium platforms. Our RF mobile revenue represented 12% of our second quarter corporate revenues. As we discussed last quarter, our RF SOI business is undergoing a strategic transition from 200 mm to 300 mm manufacturing, enabling higher performance, greater integration, and stronger value for our customers. In addition, we are consolidating 300 mm RF SOI manufacturing to FAB 7, freeing up to Fab10, freeing up Fab7 capacity for a rapidly growing SIFO and silicon germanium business. These factors resulted in a 14% decrease in our 300mm year-over-year RFSOI revenues. Looking forward, we have realized very strong design wind momentum for our 300mm platform, particularly for premium smartphones. A roadmap replete with best-in-industry figures of merit, has gained market excitement and engagement, driving an expected 3x RFSOI increase in 300mm wafer starts by mid-2027 against the Q2 26 shipments. Power management revenue for the second quarter represented 14% of corporate revenues, with year-over-year revenue growth and strong demand for both our 200mm and 300mm BCD offerings. Our technology focus on power delivery for high performance computing gives us a leadership position in low gate charge and low RDS on LDMOS devices. Our latest generation power technology enables our customers to develop high frequency, high efficiency DC to DC converters for a variety of growth segments. During this quarter, we experienced increased demand from existing customers and also saw Very strong new customer acquisitions across our power portfolio. This momentum is primarily driven by growth sectors where power density and thermal efficiency are mission critical. Through close collaboration with our lead customers, we continue to advance our next generation power management roadmap. Sensor display for the second quarter represented 12% of our corporate revenue. In our image sensor business, year-over-year revenue is predominantly flat. However, we are seeing a sharp surge in demand, particularly in the machine vision market, for high-end, high-resolution sensors used in semiconductor inspection driven by the accelerated build-out of DDR and HBM memory assembly lines, and as well in the automotive industry, especially for EV battery inspection. Strong Demand is expected to continue to grow over the next two years. We are well-positioned to support it with a range of products our lead customers have developed on our state-of-the-art global shutter 300mm platform. Looking at utilization, during a period of high-capacity ramp, Fab 2, Fab 3, and Fab 9 200mm fabs operate at utilization rates between 80% and 85%. Fab 5 in Japan was at 75% utilization. Fab 7 continues to be fully utilized, well above our 85% utilization model. Now I'd like to turn the call to our CFO, Mr. Oren Shirazi. Please, Oren. Thank you.