SILC - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Fourth Quarter and Full-Year 2020 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.

by company's received release. all have now press the You

view contact received Relations Relations. you Public If would news now or the www.silicom-usa.com. not Investor hand to company's please of Relations in Silicom's begin the like section X-XXX-XXX-XXXX like and you have GK I Investor would Mr. it, please? Ehud Investor Mr. website, of the Helft, GK team at over to it call at Helft

Ehud Helft

of I you full-year Operator. like would quarter call. welcome all Silicom's you, and to Thank XXXX to fourth conference results

statements economy by with coronavirus in other of disruptions to identified not attention manufacturing or I obligation the and in difficulty larger are the conference change and evolving property; limited relating may products increasing Before including extent on like of disruptions increasing other events NFV, we world's the we our resulting start, passes. events are Edge on revenue and would will general the developments the time these dependency of maintaining factors markets; documents projections that results and those customers in along as intellectual markets; cloud-based number adopted protection These future contains rely recognition; and entire information. on Safe spread a growth commercializing to COVID-XX; forward-looking may smaller dependency does customers; with company which which result the filed assume This an only Actual projected to in the draw statement. predictions to the the from our of your to the marketing customers regarding solutions future markets and of of or substantial to services; evolving and Harbor as materially increasingly any the SD-WAN, these update a for statements brand Silicom by or number speed the following performance call likelihood SEC. that competition; protecting in differ provide a company. and novel Silicom's the solutions to

method with alternative are or for substitute additional in provide in our investors operating information condition not financial provided for as These them full results. today's order A an and is included of an CEO; of analysis GAAP Orbach, on on will earnings press the financials. Shaike Eran call by Mr. will Silicom's and you With Mr. who begin website. us provide Gilad, Shaike the following release the non-GAAP are overview results today call. In earnings in measures by understanding to financial disclosure presentation be measures it future and this non-GAAP ongoing useful press be financial during Such company's should stated, conference certain believes call otherwise discussed forecast these by financial make measures addition investors' strategic Management non-GAAP be this that used non-GAAP current the financial non-GAAP assumed company's of and the on the measures release, discussed management for a disclosed basis. results, assessment which to measures non-GAAP accordance measures a in to with future. find the Eran are can is evaluate cooperation reconciliation decisions, today's will company's will such to performance. and GAAP. of of Non-GAAP of the are Unless assessing prospects followed with financial financials management measures the CFO. to in

please. that, to like And Shaike, over We call question-and-answer would the call the with hand ahead I to session. to go over the will then turn Shaike. now over

Shaike Orbach

would like all Thank of results. Ehud. call conference our you I fourth to quarter XXXX welcome to to our you, discuss

quarter of This a XX% QX ended and quarter. the over fourth the of a our and quarter. We of reported $XX shareholders. the versus quarter million over past value we of increase XX% strong expectations, results the for tough Despite increase in solid profitability share Furthermore, quarter the XXXX million. improvement of cash, the over and net further our We fourth for versus represents our year, in improvement XXth over buyback $XX.X what net growth million quarter year, financial in the last improvement cash $X progress income guidance with XX% the of We are used very our saw prior a pleased to revenue very a a position ahead reported with XXXX. strong still has with on with the increased been goal bringing revenue previous XX% year quarter. also our

Our strategy to maintain business business difficult with results our the continues of environment. of and resilience overcome our continuity a in bring than plan all able to challenges we the shows have demonstrate move our ahead and us. ability world been that the pandemic to ongoing that and more This

over were is made lines more the was I the before. ensured the strategy fine Today, important increased the time we those talking our than clear and Throughout our most throughout see to with spend marketing This sales ahead as where cloud, that even to the about penetrations today's as into efforts fully and and driving of we the market our focus as to, coming that that product want successful we R&D addressed XXXX, past directed relevant trends. of business additional few and quarters. tuning our see well XXXX. we in primarily disaggregation and During tapping cater fruits as in that more our We the XXXX, we customer trends with trends, years strategy investments decoupling. shift focused ever well already investments

most increasing the only what and and such cloud basic which aggregation parts shift in various in the decoupling the cloud O-RAN, of trend, positive are important Summarizing cloud and the shift is trend disaggregation Networks, Access obvious public their are as cloud of a standardization, customers is then Open private. to to which like infrastructure supplier and hardware discuss demand interfaces services XG decoupling replacing move gradual to segments, Overall, dramatically infrastructure both led the be our operating and benefit of parts and the have offering, efforts. Decoupling networking vendors. Standardization software adopters adopting the the are by are has to now, sever the appliance like started cloud key separation with decrease the and the the has would again moved and all us. independent built which a trends to It which decoupling. XG a of towards at from a immediate standard Disaggregation I The SD-WAN These with the is scalability. has procured proprietary discuss outcome impact, process is increasingly these started allowing I would market Telcos they the creates procuring standard in Radio trends the two their interfaces. software decoupling and generic underlying the And players. This market. the which impacting traditional of Telcos provided the process from are separately. This software of created parts as us. layer trends, separately is NFV for cloud cloud service, for independent network to disaggregation deployments. the impacting the is how and various first disaggregation which to the means level, which allow impact while The the sell players. our allowing both on in trends procurement between hardware,

for in with servers trend, acceleration me for Let significant types and servers massive our for of by FPGA need which Smart in It the as performance. NFV These again has us. Cards, is trends huge the as huge. Cards and devices devices, use in disaggregation caused that years including of the corresponds to for existence NFV. mobile are demand We increases over Smart basic and standard. increasing offloading now the the SD-WAN the based Smart Furthermore, elaborate. such opportunity support Standardization required and the Telcos decoupling cards, in trend. Cards, XG/XG independent are to other market platforms demand in-turn for The and for past standardization both Cloud seeing penetrating demand due CPE further O-RAN standard our is SD-WAN CPE acceleration for the the devices and the obviously the investment the infrastructure developed cloud created This software we cloud potential smart for through offloading which cards. abilities CPE a and

O-RAN able and based integrated the to needed integrated infrastructure, and synchronization which to functionality, creates of where dedicated networking, both emerged for such operating mobile these Consequently, and acceleration, in the now All smart and edge are or whether FPGA a capabilities Within in in are protocol, customers the platforms. we unique we now acceleration products definitions. solutions, a backhaul, segments their and distributed the both O-RAN the network or of are functionality all for accelerators take our [protocol] our at can deployment. via expertise, unit, as these our through FPGA includes of via time opportunities advantage unique combinations propose

our time acceleration also huge the for the We by plane market. cloud offload itself FPGA-based a distributed towards are other telco generating in synchronization And is well. solutions backhaul also interest as cards user proposing for DU unit in functionality our which separately offloading are moving manufacturers

to is invested that are perfectly all strongly As moving CapEx markets market. efforts you are we beyond box see, support significant also Smart that Smart and expected Smart areas They The for over Cards, address together the performing and our markets years. with through huge continue penetration these the Platforms within in few past infrastructure and their O-RAN-based can trends Silicom Smart and now smart related in into growth cloud XG/XG investments. XXXX positioned. we Platforms. through and The mobile the separately efforts SD-WAN support our our And NFV Cards have support they

our In lines able these our and initial address to trends. we across trends, developed have we correlated achieve success with all to investments fact, these product have been

to clear which very became not to did us strategy. focus us, our focus Our abort match allowing efforts

markets, our that the are what we our longer traditionally all even I converging However, sales than are with favor, seen. trends, telcos which at with have in cycles stress in current especially

the the an design have continued Furthermore, many other with our traditionally on already we have why recent much achieved we opportunity relationship customer. once success so indeed represents wins each And On and a like wins, telco establish to for we those long-term are potential I recent would new have hand, design experienced. also achieve potential is such sustained and successes. scaling to important. this of than wins what greater focus revenues

offered FPGA-based you we happening, planning were As to with its selling important the is one vendor, which a network actually current of the now now which functionality are growing of card And indeed, discussed. being for different customer next a Card, the is for an for have this gradually, centre opportunity to about an we're Card. is what using of codes accelerate also another Smart our we generation And customer's know, the data cloud part nodes. quantities discussions begun is Smart solution

sale this of of a to operator mobile the selected announced be architecture as new world's price. once architecture and reflects O-RAN selected all strategy. quarter, and architecture telco the selected expected These capability values of of to cloud in It architecture. our reach multiyear that Platforms Should the works next-generation of potential and a have and Smart with decoupling price it is background the sale of All is It field purpose the the from just Smart Platforms with both based indeed in of SD-WAN trend It wins, production, customers, selection altogether, And be software dollars customers, uCPE example Smart disaggregation includes we our to our with our FEC relationship this vendor. imported strategy. Intel weeks we the of was by and it that for three continuing the we decoupled. to Cards do from customer time October, our same revenue is the year and design the while we're NFV this Tier of all that About new we which the one in as building customers. us, for for disaggregated that such also of compliant, new for solution together proposing per X XG the kind synchronization. FEC relationships close are access I Later a The customer with our fact again, long-term telco for know of alone. of principle this on is the the V-RAN decided O-RAN-ready well solution $XX of our very wins. importance integrated units. our for by strategy numbers. telcos we past accelerator for demonstrate customer cooperation win network components revenues. is telco to that this fully vendors, software millions new acceleration announced Furthermore, work the price solutions. leading portfolio cooperation could radio decoupling of of awarded and providing us our enhanced an to this virtual million it fourth beyond with distributed far distributed announced a exactly built their our ago, network one the our two with in contributing part for XXs mass XG largest OEM product that Early The and units important building indeed win

beacon, each way a a own in right. is the is which giant case paving other this in of many customer customers, for their Our

our the the the requests industry We key additional through this feeling of bringing built the extremely of both the close two and telcos cards have decoupling as the significant all high users and our on directly. Intel, XG created door on deployment process, demonstrates value will This to players continuous facilitated leading understanding This FEC relationship created unique level solution of by XG open working closely relationships with to are in the additional by we our for through through accelerator and disaggregation of the key been approaching further server close manufacturers. also that dynamics are the the will giants, part have we're performance ratio, provide. deep relationships of system Value-based this and suppliers, close our world end space. with products evaluations, with market. us way, unit Furthermore, which variations in a which telcos which for our of top with we that sales – win most intimate already other work we distributed of trends

well recent addressing of investments few I as trends. to a As success our with would see, all as you guidance. aiming are like strategy line at announcements discussing can these our in spend market our moments our and

at the For we expect midpoint. at which XXXX, year-over-year the quarter represent first revenues of $XX million and $XX million, between of growth XX% revenue

presented strong list growing feel exceptionally on the positioned of of That baseline networking well with our orders, some wins, our comfortable latest lead significant very the color Given XX% believe long assumes the for by COVID-XX market overcome space, $XXX annual we year-over-year focus XXXX million. we able Components our design prices it markets in increasing million solid with latest in also fundamentals represents $XXX generating At of times fastest that and of are or the see be the growth. vendors. increasing of and times on ongoing the long will of times It our are growing XXXX is of midpoint cases activities months range more assume beyond. pricing challenges to continue it worsen. critical components and and longer. – the note, and be and lead our to providing lead we will and we revenues Please in expectations from not and scarcity some even many will XX chip crisis

in to bring could could effect inventory, products more mix could or impact have wins. than summary, ensure It Silicom’s significantly or In would of also best the have our impact done trends and the ordered faster we've from with when gain longer as had decoupling shared mix. forecasted disaggregation of from additional if lead the – the you, potential of increasing actually design potential. ups we forecasted times While it the than pipeline impact, possible also existing I've our ramp the of wins diverse sufficient from upside an significantly

collaboration and our few telcos, years going for coming Our design with us that the wins, deep what the software provides and performance expect ahead. and several growth hand we with review will I we ahead vendors Consequently, of for our achieved ongoing will to please that, have growth much years long the few results. of continues Eran, achieve call over Eran a rate pipeline grow. and which partnership well past ahead. with over quarter’s current Silicom years, the forward Intel revenue that long extensive see double-digit optimism leading list will compound and we to now With annual for detailed a continue our of go

Eran Gilad

of were increase revenues prior million the Thank of year, quarter as $XX.X everyone. Revenues quarter a with of in in fourth of the compared last the million. quarter. year-over-year and over for you, fourth a $XX.X Shaike reported million the reported XXXX XX%, increase XX% and is This of $XX.X hello sequential

XX North Our Far and breakdown of East Europe months geographical world over revenue and were follows: the as last America the XX%, the X%. Israel rest XX%,

which excludes financial During last the expenses accounted will acquisition months, respect revenues. basis, of of financial granted in I non-GAAP intangible of liabilities, for presenting Officers Directors, about XX a and and expenses, well our to related the of XX% the impairment RSUs compensation together adjustments, as lease our options be assets. as on non-cash customers XX% employees three top the rest results

trends our we and in XXXX, lines focus investments match As following success did addressing with across these which the our and strategy. efforts, some we Shaike mentioned our our correlated disaggregated aborted trends, decoupling product all initial not

cost $X.X a a million of As impairment our took one-time to charge result, we sales.

is representing million, the a compared sold the of of GAAP in For or the The margin for release Operating numbers, gross was to refer function XXXX. of fourth quarter the Gross quarter of product compared profit were reconciliation press $X.X $X in million we million XXXX XX.X% expenses a gross XXXX. margin in profit fourth please specific quarter. today. earlier gross quarter the fourth gross the of issued fourth $XX.X XX.X% to the non-GAAP million, from full a of in the XXXX in variance to of with $X.X mix quarter the of margin

compared of of compared for XXXX. new the quarter fourth million, investment quarter income of last $X in the developing in XX% Operating for of $X.X $X.X of All related to the reported year, XXXX. million million, of diluted the increase technologies. were increase compared the was in – significant represents per income is quarter. sequential increase fourth income reported of a and was of R&D and $X.XX. quarter in This Earnings $X.XX XX% quarter of and $X.X EPS quarter operating the year-over-year fourth Net products, of an the IP reported is XX% with share to in our XX% in an continuous $X.XX as the as the prior increase quarter of increase million fourth a XXXX over

sheet no Now marketable to equivalents, turning December per the debt or cash as company's with the the balance XX, $XX.XX securities bank $XX.X cash, XXXX, outstanding totaled million of and share. deposits

executed started we buyback share quarter, on May million plan, we which the During on $XX our second further X XXXX.

During would cost happy summary shares take to fourth my $X.X questions. the and XXX,XXX any be we total million. a That we of purchased approximately quarter, Operator? at ends

Operator

is question Instructions] first Please & of [Operator Company. Needham Alex ahead. The Henderson go from

Alex Henderson

very you Thank much.

the longer bit to around light, issues congratulations, really XX unusual. unusual in an supply want keep did off, giving telling additional it to How months paying the I obviously, really resolved? of quarter. get you you your procure little approaching to some large suppliers that outstanding think quite terms relative times to seems I you lead but is a margin how that's up about in strategies And gets relative talk the off, First to the flexibility? satisfied, like constraint? do unusually are impressive. supplies or customers COVID you if needed period What are an your are that constraints, it

Shaike Orbach

in This issue a challenging are I or several to order of is unusually be that is things all, perspective. first constraint this going XXXX to this doing Well, that. And mitigate year year year. yes, an obviously really large is from mean, we

- year. of indications did this and to are First ourselves, not that something preparing a challenging that started has now, be right think all, are is I we some it's we have we going

customers, We forecast and to our asked certain with them a have we as for as approached a potential possible. provide upside, accurate

around. We not ahead time. have and of that orders impacting if forecast everything that the And planned estimating we have had these it's that components have for challenges way the internal we meetings, means as just placed are for other

In on fact, well. mitigate the I or would would wouldn't the because as impact, everything, the which would But we is challenges to the planned. try be not be impact say impact

which a So to that took a everything placed part in order certain is that, on we able we time. our even to ago orders of of plan, while care be do

of that. So that's one part

that I of pressure part I helps. Another that the nice. it be do would not line, say But at that we may mean, is, pressure, bottom applying see

would explain challenges, and talk need, And so that we invest more. that, that our business to we're I then about you allocating forth. these think to in to so potential, if we some time success that so I management at components to more suppliers So say the split how you because getting and due example, and for get we area more the seeing their on in them my would of time to more to I my look am

part process So is our as this And that's helping well. customers part of us making customers, of third have And that we second they're that. when part process. that the with a of big

to unfocused customers undertake in at to need when our market, want talking components, is to And I Now that But these that, a demand. than in and with on rather up okay. to the - come components, say free authorized these from manufacturers the obviously once themselves, of confirming buy the some they that more. in you an the pay for top quality perspective, rather would the - are if of least or also could participate upside because we from this you you only buy free to an market from

to call to should fees, take we working for us. be order deliver for also goods, and the this expediting in able to PPVs their which us is them they So,

would always I that working. say Now, this is not

pay somewhat we not for that some able we would achieve we be are that to want sometimes components more challenges and feel need be would need to get them we're in successful. that other what order challenges. is them. to in still parts, And There to time to we will XXXX achieve. But But trying be there. overall, are going I still mitigate This how the to to

Alex Henderson

questions, then on the the it's you think deals? operating you line Couple the happen magnitude what And impact? to larger rates relative can are then think continue to shift quite and exchange top These you? is for of in have you to to 'XX the gross bit the obviously while guidance going of has of of are line. talk what R&D on about strong the given trends and finally, an as opportunities margins front obviously, Can impact about larger in shekel investing you a plans you talk what been margins, your the

Shaike Orbach

respond, we would elaborate dollar. in later say would first all, yes, would I I Eran the R&D. shekel versus are investing that, of on the

even more And focused. haven't a before. feel in, can why that I we areas, investments been that’s those that's why R&D I increasing overall. able our are clarify But that take I table, are you of be increase that we're our is I than strategy away our in a during much in in other what are are consider it's though if think level tell we the anything going things XXXX, strategy have able helps I why a part And we us even not expenses, we feel We lot to more efforts, right R&D the able right invest do table, from say off that's would now. our to believe that - strategy to that to we now but which take to dramatic increasing our because been to investment as which not the our

picture subcontractors mean, of of like a of in level. that in add hours, would the I perspective with in our the these But this can we dramatically, yes, sometimes much change would terms how had much efforts, people indeed, color to I from it our this dollar focus. shekel increase Eran, versus it say I men in little the expenses believe I just labor but much year. But feel terms not the a R&D in overall, would So increase focused, shekel can certain dollar. engage you we invest investment, because and because bit that cetera, more et versus that really more to is the better the significantly

Eran Gilad

the it's rate, all, the we Denmark. About of have in both a compared the shekel first exchange of effect the the subsidiary dollar and Danish Krone,

approximately expenses significant. in effect approximately the effect the operating our was was negative very the on So $XXX,XXX. quarter was also the actually $XXX,XXX. And on And negative effect our expenses financial

Alex Henderson

the over of any did negative not be and over policy hedging highs looking look we the months your whether shekel. new what is was move really us there obvious forward forward, as or we in couple to periods. should the krone impact you whether at but the to look - edging obviously is remind last on could - Yes, move the just there I I the in

Eran Gilad

is simple. very policy hedging We not do Our hedge.

Alex Henderson

right. That’s

Israeli Okay. I couldn't year? are And remember too companies give you coverage for the many to then guidance tax remember. can

Eran Gilad

or every anticipate that a we for Yes, few forecast zero guideline say the we quarter quarter, I the see close It was one-time result XXXX. approximately expenses the actually a to effective will speaking, tax in of effect. zero. as tax we generally rate And XX% repeat positive you could is

Alex Henderson

And then one more question on the modeling.

So capabilities. got cash obviously generation you've tremendous

or capital relative share doing to going are buybacks forward? other usage what So you

Eran Gilad

planned as the buyback itself. $XX targets, progress We of As I actually was one to and call Board meet plan million the it think we our by mentioned set on year. the with within buyback which intend

Alex Henderson

this point? exercised at And any that -

Eran Gilad

Any what?

Alex Henderson

it any exercised is point of ever this just $XX or million outstanding? you Have at that

Eran Gilad

yes during than quarter, more the even fourth actually more Yes, is the… than we which purchased $X million,

Alex Henderson

million outstanding $XX then?

Eran Gilad

Sorry?

Alex Henderson

outstanding. a $XX million it that Is XX buyback, got you million $X $XX still million million outstanding in in is the was there Where right? it's

Eran Gilad

million We approximately still $X invest. $X the in million, pipeline, have to

Alex Henderson

left there's million, $X of million? So million the $XX $X

Eran Gilad

Correct.

Alex Henderson

looking what That's was you. thank for. Okay, I

Eran Gilad

$X Yes, million. $X million,

Alex Henderson

floor All right, see the queue. I'll and back in get

Operator

[Sergi question from next Please The is go Mascaro]. ahead.

Unidentified Analyst

of So the quarter, of seems great finally it for we're congratulations that all momentum. first some building kinds

in So there that In that SD-WAN first was the Did said, all receive last project Tier a is you about yet. X SD-WAN was quarter, not ramping my those up question being space. QX?

Shaike Orbach

let the sure question me think understood make perfectly. that just I - I

was ramping You're have call customer if you're SD-WAN asking it last question? we that the up asking it's in the said right not that about now, was one we ramping that yet. And up

Unidentified Analyst

Yes, sure.

Shaike Orbach

Okay.

So question we ramping past telco I one last the wins had of related this up. two would say time said of which that that them to was we was out one, in that

The to other because not situation there that time we each eventually not this some a ramp Well, find though we happening is up yet, changed little even dynamics. saw now, different bit that something I'm is that say it ramp hesitant has is did right happening. one would that out something

So which announced announced the to do revenues quarter, ramp million I $XX we on mean side, really have design even these SD-WAN, together around would of have have did level have XXXX. to we up a the not. from amount ramp last will during to quarter it's per other But related the hope And year. during some that during expected did are I we certain And and up we wins these.

Unidentified Analyst

the kind this Does the previous the which one, win? earlier relationship have O-RAN with was month of press of filterize any about release

Shaike Orbach

understand that by not you Can run please? again me, question. did the I

Unidentified Analyst

sure. Yes,

month So O-RAN kind with which as the press the release was filterize does press the earlier any previous release, of this win? of relationship about

Shaike Orbach

press telcos. two separate release two the are entirely separate with No, different

Unidentified Analyst

the to with great. second the these with this not wrong, going for working believe Intel the the national Intel half I Intel. are selected is am partnering networks deployments USA. only XG I product these start And If that's are deployments from year. in one is in of that you, for vendor you Thank

information maybe public there So available? could project about you since speak is this

Shaike Orbach

right Well, cannot I now. speak customers specific about

that in non-software, customers. why with intensive And what accelerator means and thing the Intel I in engagements Intel, is is working the We that on only actually the currently can we're way. is variety say We're with At product with goes Intel's the all And deployment and such this can And a you across an needed product Intel can time. customers. these very at say a I FEC, the one in helping our hardware us to us a are is in with support is that tell which I market FEC I this you, XG the would is customers. doing. tell which that obviously non-FPGA is which least of Intel's acceleration specifically helping indeed board. eASIC, silicon significant Intel would based all

Unidentified Analyst

and Okay is perfect. markets? targeting the China you Are I believe segment. like in XG that to India expected fast really Asia grow

Shaike Orbach

say Asian the but yes, I not only would the Asian market, targeting we we as are Obviously, Asian are market. well. targeting the market

Unidentified Analyst

FPGA? Yes, what mean you perfect. software it Did your Thank margin? you. any for terms sell gross kinds does of And in of

Shaike Orbach

sold we if saying FPGAs? You're

Unidentified Analyst

FPGA? your kinds sell any of you I with mean, software No did

Shaike Orbach

product way mostly. but okay, RTL see. standalone the with whichever inside mean sell, FPGA cases, call IP, definitely a we to of Oh, FPGA, not and which I as is as sell that or sell most with we the it. We in it you both software coupled want a part is I which software

margins higher. an why margins, these Now, on impact this which the sales has is our on are

down which grow be now are with accomplish huge player there major quantities, the they and the level up that would our at we're proposals FPGA players margins to These type being the said, say which they that very level XG cloud may to approaching very, quantities not are going when the and the we significant. in yet go level once general I However, to a of expect are that than able to higher margins rather - is is high. to the quantities to a which closer to

Unidentified Analyst

Could you your can in with small only find O-RAN are segment which a I us the Eternity it’s competitors maybe share space, really and company?

Shaike Orbach

that I is big say first Well of should all, O-RAN name. a

O-RAN. of space full the covering not are We

a are radios, O-RAN few there are there we are will developing companies obviously. and example, support which For quite which not

operate than would giving define O-RAN. we it are within operating you number we are well So, a where O-RAN, rather within I we

units. what different unit the all within is So, distributed of first actually there major architectures. operation O-RAN called is This our the of are area is

may with of is sometimes side. be unit it other So please, not unit radios with interfaces here I which the be our unit and compute with with architectures. not architecture, side one way in on in radios, description typically a our anyhow, accurate but unit switch my in - on is the the the actually may the central or interfacing distributed the a all because XXX% accordance with But

we market. units, distributed this the to proposing within are So

one an what of and card. units one of are types time on or accelerator, time two the the distributed synchronization. is goes eASIC which then accelerator card could synchronization either is card the FPGA First all, which the is the a an cards, other And be based Intel’s inside

We customers from but cards the are the SD-WAN go said, to as platform address the not our itself. importing only also somewhat into platform units, the able offer And which requirements. NFV, we're customized to are inputting also we platform, itself I - distributed to the

platform quite would the it's they And otherwise elements unit would we - they understand do smart which in reduces distributed they by of a to take this the full the had relatively the single complex some and have unit, a itself because see value cards with unit, care value the customers, why platform buying integration, do see few because themselves. a have a as product,

area So we support. within O-RAN is that this one

go Edge, say. central into within to core cards, cloud, computing area the the this is other everything we still telco closer is which the The proposing I to but FPGA with or are would to and unit the is one

is say which order in are end functionality. higher we support I to plan which FPGA there offloading would offered is of solutions, UPF, proposing user So

offering not O-RAN, our are is parts we includes that, other I this it O-RAN that which So said, in. includes as some only of within not participating

Unidentified Analyst

Yes, in the yes and your maybe space? about competitors O-RAN

Shaike Orbach

again, I compete distributed this area, most main the only is are market mean really being are is these not solutions in assistance, would I with where all That with they think is synchronization is the say switch. Eternity say switch, the directly me using mentioned many Eternity property time you area. synchronization. Intel's much but a architecture. to trying interested that in and is UPF is of And FEC time this why architecture where The be offloading. a I within money. saving are the radios whereby is that and the area we to Yes, we're this is promoting an would in Eternity acceleration, more so with is This the of small competing that us competing a There one Eternity expensive really external with we that is sits the UPF, the of let to a thing both operating. in fast say is where the because competing inside our about though, able goals this time customers would interfacing unit, synchronization architecture I and once said, achieved synchronization synchronization, in the time believe architecture the lot terms achieve I time UPF

that at but where these. technology. this proposed architecture stay we the - indeed mean the that first which winning doesn't I that solution is think be market, least But will we would the believe to like I first, So significant the

of these additional sufficient terms I competitors difficult they're our well. that that of requires one, they platforms. be FEC would I ready, business and competition within both hoping more in but plug would for competition, for be will a able I'm the sure qualification once We because which What would the themselves think would of is was these achieve in will to cards time terms in synchronization make as solutions acceleration and qualify say lot rise. that of to partners, it

Unidentified Analyst

thank you. Okay,

by be your to speak plan? your you Can buyback current that believe I about allocation So April. capital program is completed going

Shaike Orbach

program? buyback For

Unidentified Analyst

be Yes, completed it's to yes, I believe. by April going yes

you could plans capital speak allocation? about So about future your maybe your

Shaike Orbach

and think get will about program this obviously that. to and end the decide Once will We decision. closer of we modify we then our

Unidentified Analyst

would you last your wait the on it. question, we about XG for the my year? and SD-WAN speak deployments can And for Okay, expectations

Shaike Orbach

For this year?

Unidentified Analyst

the XG yes, deployment SD-WAN yes? and the Yes,

Shaike Orbach

we and The one is soon. cannot time, and long provide in have can that believe at pipeline. we and both pretty additional SD-WAN the in tell both you we areas, details And be that will XG thing in that I design-wins I achieving a very thick this

Operator

next is from Henderson. a go Alex The follow-up question ahead. Please question

Alex Henderson

you. Thank

here. we you fair you I issue about eventually a It pretty which number ago, contracts, alternative fairly a of size the that have. picture are predictable of out, was the where have contract and should environment? little some of singular talk the the lot enough and have is breadth like the of sounds that you huge it years when work of clear diversifying more a solid ride dynamic the them seems because lumpiness a of didn't characterization demand you now, that hoping of be smoother - is So IBM the from that that number bit these Is could a was it the it we that had versus contracts contracts

Shaike Orbach

that there while And risks. we I think had mean, anymore, even though don't knows - unique IBM what at said. by Yes, it we IBM is definitely, everyone were this I parts I it's contract that to more but you contract. now the is. believe its with would had you just smooth right of experiencing supposed just say many And And now like not said, were I that we're like important time.

Alex Henderson

constraints that be and see So actually be the that might the which ease additional that in and if of upside dynamics persist case the right is improvement there these gives meet into of about in here? think that Is as in supply are this will supply demand will through visibility coming contracts there some the in pipeline conditions upside? ease terms constraints way that supply start does in up, therefore 'XX us significantly 'XX additional near on side COVID this that constrained will to robustness we to

Shaike Orbach

previous a yes. massive they IBM before so all, deploy I cautious huge our of customers problems all all is from what sales all evaluating, a took are their taking the are say our actually started case, testing, we're this where that was related matter these Well, still in is is or general, first have the we I are would pipeline say and to resolved that, with launch they partners before to with case right deployment. approach of carefully And very challenges. the that question. or issues once not long, is why this what they taking approach. they mostly is a we're launching now actually seeing your very seeing again that. cycle This contract, They different and a the internal wins and before design risk fact, In they this as time work and including would

phase - obviously different some are different process. or these we with different in customers, within of this time Now

their close and take some So then us customers I it generation whatever. to and in them Because previous of and was announce past happen able experience will happen, or pretty would lost longer. of in impact some it components delay, the hopefully something are be better them of their we does challenges eventually, then decided and to soon, due situation. others part it the think to the was when design that and be are the to delayed business pretty a this did we and disappearing, the may we win Obviously, use soon that eliminated

back, are So I what right the overall, this experiencing than say we're once would challenges higher ramp a now. disappearing, represent and components capacity would

we years planning believe about in see I that's growth why would ahead. the not we're double-digit talking that's we're this year, only And continuous for, yes, coming So only what growth. not but

Alex Henderson

the most that Let's higher last that revenues, years, gradually some two years. but level? on that talk the Should up at trend the spiked anticipating level we about little in XX% it to be XX% your towards average OpEx bit for or been couple stays consequently a XX%, numbers. has Historically, XX% will OpEx the X% recent back of to of

Shaike Orbach

difficult value. so that obviously all, annual then exchange is expect just where little OpEx of if the about million. rate I speak because flow the to OpEx, of we an bit it's you by it could dollar sort right give a now, I think, say, well the first to of some $XX But dramatically impacted is they're would approximately

Alex Henderson

again helps. that longer that is to or longer that expected term Is be Okay, able to it no percentage down predict? bring

Shaike Orbach

that's again, percentage and we the I Really be is in the be to able leverage, percentage again would believe that will our OpEx grow would once where go working, down famous plan less. do the because see

Operator

[Operator at Instructions] questions further There this time. are no

you Mr. like Orbach that ask www. with go would Mr. remind like this call website, would concluding will to participants Orbach, Silicom's I available silicom-usa.com. ahead on to statement? Before to replay tomorrow his a make of statement, I be your by concluding

Shaike Orbach

all call. three on Yes, you, you health, call joining everybody next in time. for months you look wish you the thank forward our day. and We operator. we Thank to Good hosting

Operator

This conference results for Silicom’s fourth XXXX concludes you. and call. Thank quarter participation. full-year Thank you your

You may go ahead and disconnect.

Silicom (SILC) 28 Jan 212020 Q4 Earnings call transcript