SILC - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Second Quarter 2021 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

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

If you have not received it, please contact Silicom’s Investor Relations team at GK Investor & Public Relations at 1646-688-3559 or view it in the News section of the company’s website, www.silicom-usa.com. to call like to now would hand over the Mr. I of GK Helft Investor Ehud Relations. Mr. like please? to you would Helft, begin,

Ehud Helft

I would like Silicom’s second to welcome all XXXX conference of results call. quarter you to

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

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

provide the to overview Now, today on the Shaike Eran, results, who call with analysis of CFO. us Mr. the of Gilad, the followed Orbach, will begin will the Shaike and the CEO are Mr. the an Eran by introductions, financials. with

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

Shaike Orbach

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

We up of with for the discussing have inherent completed and XXXX growth our recent $X.X results continued year-over-year. and third business quarter expected XX% revenues shares model. in net income year-over-year. that a demonstrating and million the started been million purchased net over $XX increase EPS of million. was $X.XX total, XX% new one. increase solid significantly of growth In the with pleased This to very ongoing $XX higher $XX quarter our an on this we track year-over-year second XX,XXX in million, EPS reported buyback quarter. $X continues. demonstrates are in in to We reported at our in amounting We in quarters we XX% improvement quarter, and and XXth We our of is income financial profitability, the leverage the million,

of position allows on over strong ongoing we this cash net Our cash million At and to contribute increased the had the in sheet. generation way. shareholder $XX cash to us in value quarter, end balance the

for environment. quarters XG/O-RAN world’s by requirements we a which customer. continued their customer have the as different it demand. our for network disaggregated were enterprise its We valued be momentum our telcos, businesses platform expand particular, of This of that the our of holding one Telefonica understanding win later, months, the Tech, we largest an as Telefonica a one advance for wins portfolio our Telefonica’s inherent major the equipment we but capabilities, of differentiated penetration networks. cards that equipment major first leveraging even very space version time few that small May, in with selected world’s was recent for this XG SD-WAN providers with It on we was in XG demonstration of mobile in in mobile and of feature build as important booster segment. this the third Tech in a further This and pleased our continued the to the digital the this a has decided the growing well unit distributed recent is only leader solution, to our SD-WAN infrastructure selected had acceleration leadership two selected vendor were solution, specific is Smart flagship next-generation X major our solution work set largest part global itself medium to from markets, our current the solid contribution win also top solution. XG of Smart us and is with discussed that market helps demonstrate, In to Not our importantly, more in segment. parallel which selected market. SD-WAN strategy third in to strongly global in XG A design but our platform, market would also weeks on our performance only our has for the us the our XG growing honored also

performance also well a price as We ratio with integration hardware demonstrated our as superior to their platform. of software flawless

the solution We as lead Tech an while offer the road. are and effective aims involved believe known, a also with Telefonica to working or down strong to in effort highly them and SMBs, will costs. enjoyed project, the for the This enabling of help vendors approach which service and Tech Telefonica upgrade to will decoupled maximizing network leverage we agility the relationship wins provisioning, other their and additional small businesses, in-house they SD-WAN reducing applications delivery connectivity, to cloud-based flexibility concept. medium-sized SMBs collaboration

to in very grow in that current market feel this Tech future post-corona will we deployment is world, work be the growth XXXX. fact, would type SD-WAN-related SD-Branch reflected new significant this in and and of expects SMBs quickly, In of norm, the demand perhaps service for ramping our the up where remote begin home service from such obviously Telefonica revenues. and the whereby from be

that of ever we move flexible over give will than business the them As concept connectivity more businesses more and that is to cloud, to the more SD-WAN increasingly cost-effective the and robust, applications power before. believe see

as Tech the our represents both expect and providers, one projects, to positioning this for on collaboration of decoupled to transition win Silicom. for growth Telefonica our We drive Tech service go-to like growth potential with therefore SD-WAN solutions continue for multiyear Telefonica their well enabling this and additional sources their aim strategy. disaggregated advanced as as multiyear We deepening

the quarter, new design and customers that we continued announced wins publicize. focused Design we during two did these and second further to we Beyond key not Wins on that bring

healthy good continued wins our rate in indeed into Design growth. SD-WAN see We we such is that segments. especially of believe market Wins, and the XG/O-RAN what And fueling a accumulation the to is and our new pipeline of conversion do long

issue scarcity is year which on shortages continue industry-wide components the these increase very a to we prices. been all across suppliers. and last materials all of in I least increasing have everyone stress to and is at our XXXX this our to of first and half ongoing affecting way. throughout that an significant extent in year. experience this would to these Before addressed guidance, moving electronic and we persist continue to global Similar our Components which shortages now before, into the never early of analysts our times we conference a The address lead level like next expect and I to it the seen to since has peers, are shortage calls.

able that possible wins currently our to on longer ramp-ups been management, Given than early revenues despite quarter we issues component slightly planning and faster-than-forecasted meticulous inventory most pipeline. our report it possible existing and in new gain will from as prudent vendors would time the well as the times we in the as the certain move have forward. of potential are guidance. second our careful de-commit our of Furthermore, I upside deliver the additional delay note that we could that and design resolve design wins planning scheduled better from lead is to shortage

the sufficient with cash position parts our for demand relationship inventory especially we our products. are we would continue to hard meet strong we work vendors, that to like and However, add, the are strong to our leveraging have leveraging ensure we Intel. of I available to

ensures priority addition, like lists. caliber of and discuss our In are of follow-up which level I for higher customers large our guidance. our many our on products would vendors’ thirsting to the our

quarter and expect the of midpoint, revenue revenues of XX%. we represents taking first X-month between year-over-year shortages component at consideration, $XX which million, strong issue For third million the while growth the into $XX at XXXX,

annual past we expect strong, in to and that to quarters. into several the continue grow $XX of the few we the $XX of will million our current networking half performance to shortage recent us of With in revenue million summary, market few uncertainty over coming serve for and and our that, years range. of and exceptionally for between to million we achieve are revenues the expect issued still the to our allows More at revenue a part achieved fall increased years segments. well $XXX between strongly, growth year, that rate quarter coming generally, revenue million. While second have upper what ahead. the planning and of will building momentum we growth us is component careful fourth guidance compound the end narrow Many annual needs performing range we all position see XXXX, hottest growth Silicom our expect of continue we today’s $XXX years wins previously our adds the the in well clients’ on for support markets maintaining to we connectivity our of that ongoing double-digit and and revenue In ahead for the

we than and to healthy see we remains the with growing expect largest our some of much traditionally the It an coming pipeline having further opportunities design of we increasing we lead revenue long-term represents Furthermore, broaden Our sustained SD-WAN XG as and experienced. recent the to have potential world’s wins wins greater scaling relationships roster cement months. for in momentum companies. and what and opportunity our

bring of broadly, a which of fastest well ongoing has the generating are to customers. that well networking with many focus and optimistic growing and space in solid and current new I list fundamentals, Eran, baseline wins the market that, potential design of deep strong the results. Beyond long our more XG us XXXX some space, quarter’s of strong our positioned beyond. in hand new makes our as review pipeline over the Eran on growing With call orders, the ever in ahead. for More to for that, will growth now our strong go long activities credibility we the us us Please design as wins bring itself in the of markets and detailed

Eran Gilad

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

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

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

second numbers, gross at non-GAAP second margin of in compared of today. variance function range specific second XXXX. a upper were to Earnings guidance million, quarter XX%, Net year-over-year of margin increase were million, full XX% of The significant a has compared quarter quarter. in R&D for XXXX refer to and technologies. $X.XX of XX.X%, the with XX%, Operating income products, continued compared is we of quarter, and XXXX. sold of of million XX% million XXXX. diluted For in from quarter second XXXX profit share EPS the of quarter, margin is expenses profit previous the developing $XX.X been and quarter gross Operating was the $X the in or $X.X second reconciliation of increase the gross quarter earlier operating discussed reported XXXX. related slight quarter as income million, year. the second product margin compared the release a gross and, planned million, XXXX Most please of compared of of in of million, quarter with an we of was our $X.X and is million to end the issued XX%, as of in in a in reported per the the to million an second of quarter increase $X.X to in $X.X mix to $X.X of in was GAAP the last the to investment quarter second gross new of increase as in of representing a compared and last the for $X.X of with increase represents the quarter IP $X.X the last $X.XX. press This our year the Gross for compared XX% the income

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

our plan May cost ends years which completed X, on we question-and-answer total about And shares at we until plan, and approximately $XX a quarter, XX, In of on the since started up XXX That to purchased operator $XX.X executed share third our summary. session. for During X program June now we our buyback XXXX, my the approximately and started buyback first buyback second ago back million. Operator? million share XXXX. $XXmillion we total,

Operator

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

Alex Henderson

the what just congratulations quarter large and great you’re the on wanted relative to about all pretty bit when wins just that orders the but Thanks the I it’s kick supply these think to frame. in. several kicking hard that in Obviously, reported delivering. timing to more I about you’ve talk And of a talked tell seen orders, was printed. those little you you’ve some in constraints time should of in ‘XX strong them

managing anticipated, you if that you would demand got had that have had more delivered you but enough more know in you you Or there whether than good was inventory talk I more had your further that, not job availability, you because about like? upside parts of more the supply-constrained demand? So and levels and Can than your were the was there to upside revenue?

Shaike Orbach

constraints as had at been able if of first give And more, answer then you upside if all, there components answer just Well, yes. we we all line in not bottom no an was would or a if I whether deliver the to needed to have is, on I demand. to mean,

and inventory and say, if well of believe in in, includes I that I minimizing planning them terms pushing Now to what really them that to both of as shortages, help we positive the in the forward. being explaining in: as we in are time moving lot that mean, a our of all impact investing would said, vendors be would they that business, talking us, for invested time more and

any we to we of So yes, to material, needed if if line, more. combination would on have able have didn’t deliver you it’s a both. have bottom been But the just constraints

Alex Henderson

numbers Similarly, upside quarter to $X you’re of guide, million, at I $X what to of on constraints I’m million, worth potential are we based also the $X limit that because left guide off that’s mean, third talking you’re about continued upside $X million, when that? the look you assuming seeing. the expecting million

Shaike Orbach

like I this once constraints, you number. no on right that to to Well, used had and I I number we don’t if do there are the sometimes would I we to on obviously, But have de-commit these times, much a to what surprises. to side, that again, have not other on been exactly I able now somewhat know discussed more. mean, what also would right giving it more. that how say planning vendors commit know we’re before. we is our now, they In based deliver

side, still as perspective, on other somewhat have yes, in delivering there if able is from So But well. a deliver that risk the been demand asking you’re more. to we would pure

Alex Henderson

just low-single-digits further going guide simply and tougher the first harder against implying the occurring forecast? it Is easier fourth that look is much you’re in constraints quarters of is a that? comp? decel kind Can out a behind because growth What’s that of it It’s decel. why quarter, about comps the talk big there? pretty to much tighter three out Is supply you the rate. So into

Shaike Orbach

you So is growth, I even the or at when that or XX%, which believe would that, significant. included to see like I year-over-year which first still approximately is of quarter year, all, fourth the there, like believe I say full would with a look something that XX% you in

the Yes, for said. the I but not way things being that in mean, also quarter; would the agree you’ve other I the fourth of around. said, Now reduced is rather, of impact material one shortages on the being that

are the like all fully that. which to is into provided prepared with that have than in not our more we which only before at when consideration but difficulties we were before inventory quarter of yes, mention we terms the our inventory why upcoming I but would we guidance, crisis this to difficulties, also we against do material started that, started, plan the for have So of when orders. beginning taken fourth more shortages even

quarter, the scenario third into the on results on impact forth. of is challenging, the so higher material, and so the second shortage As is say which the the somewhat impact even that would the on quarter, why more move than of the this we results prices and fourth quarter, scenario becomes than I fourth the on and quarter of impact

Alex Henderson

So with when and of very seems pretty of large is mean, I look talk the last significant whether customers do when the number, about at of you year had in, in course March, the the I implied for lot that or How that Evenstar are X in the we wins over are timeline outlook? a the demand the multiple launch of in think think you’ve that ‘XX about clear, global half those Tier here, type a projects more by back in those months product there X future the of Can a it that. the players ‘XX number? kick are will of numbers measuring you there the terms

Shaike Orbach

at to all answer provide kick I would significant had not part are in there I projects even obviously, impact question, feel differences of in all, between in the projects, XXXX that time, and in a XXXX. a these say generic to that would the of But and the first these minimal possibly is we XXXX more if projects. that of same of Well, will these

Alex Henderson

rich rear-view I see. the pipeline as And as mirror? the is

Shaike Orbach

Yes.

Alex Henderson

the at about compression the of difficult you and Can of companies seeing spectrum. I the in seeing in thought in parts expediting that’s would challenges larger are have gross cause getting happen? coming to One the Most of margins. guys causing why in the fact, a end backdrop case? talk higher opposite deals would, margins people you the expediting. their surprises is Yet against quarter are

Shaike Orbach

exactly same would the Well, I perspective, day-to-day that do say feel from pressure. a we

would in we say, having However, the could charge it, the for which would gross privilege margin call of represents variety very we reasons. portfolio I wide, of well, them a products that between mix I do a a have, of

able while main the reduce costs not the this in are increased gross the is So else everyone of because than of simply reason components. It’s mix for to quarter margin the and anyone different we are we else’s price or product. somewhat prices higher were

I not but the it mean, good, allow negotiating of difference. are somewhat everyone maybe I doing right the not margin would does just of products think is way in we’re quarter. And the like mix reductions; this increased around. tougher, we’re other good. this now gross doing reason The that environment the constitute that behind not kind cost we else, for goes but sold

Alex Henderson

I of base would the that infrastructure, the your describe as uptake that declining. underneath order have the a that center and positively So part to of mix? tracking we’ve for growth of in been from traditional very are Is a rates here, is and – very appliances as as traditional robust has XX% been variety been driving with a strong lot business on enterprises campus traditional more appliance-related, what of that surprised. demand a customer branch is and that data XX% surface traditional much It from ranging seeing into going customers that’s products been what’s areas have

Shaike Orbach

sometimes a various certain within the of demand would saying. gross cost But were to and, In fact what the due quarters. a some, to in customers significantly between certain not mix, mix a opportunity consequently, their from to I mean, did certain coming they the the us various of from due sometimes customers. to I Even traditional new traditional customers, simply we new that new is can during and is a components. and mix difference extent, say, increased reduce part customers markets, the you’re of that we the vary only have margins took terms products, the able and whatever that which, the customers

definitely a not products and it’s part we’re would that various mean, gross said different are margins only is of I part. with while segments the of and what you even say new they in the customers, So I market that, that addressing.

Alex Henderson

gross take year’s out or margins gross So margins we first margins just the the back more are half like we looking are last at the year, gross in half? those of into like looking half in back this more to year’s the of comments

Shaike Orbach

Well, to I thing only is XX%. And be – XX% define then QX the fourth somewhat and am QX quarter is that, was may that. margin, it am we fall within within of I gross that I the you part that the would average lower still an presuming that which there obviously part saying what be of for may And when that or fourth of and calculate the higher mean, I average, higher. quarter, then,

XX% So, like maybe or that. something something

Alex Henderson

see. Is And I caused mean, huge running a to that more in interest quarter? that in one something go has negative? going that, $XXX,XXX the then got in cash back this quarters. negative, $XXX,XXX, you at obviously, went unusual line there around I balance. question, to snap after just prior income have September the Is

Eran Gilad

The is big a main income the may financial be reason factor number. in that exchange rate

it on and actual against currency. it the rates depends exchange every quarter the – So, the against Danish shekel depends

the quarter, negative. was This effect

Alex Henderson

Okay.

the ongoing have Is first line, year? was flat So, assuming should exchange, as in half that volatility would quarter? of be rate $XXX,XXX in the been that the of number a we currency, the kind using, in the if exclude that in run second we it

Eran Gilad

if exchange approximately per is the number the exclude rate quarter. real $XXX,XXX economic would that say effect, I we

Alex Henderson

Okay.

$XXX,XXX. be So, using we should

Eran Gilad

Correct.

Alex Henderson

I detail that see floor. and appreciate will the Thanks. I

Operator

Sergi from next ahead. The go question Mascaró. Please is

Sergi Mascaró

ask deals first The wanted was that had today I about question of the this we the potential to quarter. have

and deals. project Can I sales we a not Tech the these case please? the speak about bit as Thank in long-term you did with we But Ericsson. one Telefonica think spoke this, that you of that with you. at about deal same had call? we with the Facebook have little another last the potential a Are disclose

Shaike Orbach

have not second Well, Tech, first and indeed, the Telefonica customer. of we identified all, we identified have

even be would Obviously, the of with the millions say very to that going deal I consider that referring if to not Tech it’s are I potential, a number new millions a launching. is So little a it’s am that them. would general, to be And clear, a not in they obviously, going name. Telefonica yet of dollars. of It’s bit the be dollars, low it’s they to to service failure. of difficult. But

be, what know. the volume So, exactly will don’t we

second I this the to would out But the we move customer, win, million products sell we are single say to year, we believe penetration we a are that able product would dollars is that selling expect of forward. extremely this specific as digits. we that As because important, per customer we expecting consider to we more customer to to few be this

Sergi Mascaró

that Also, using you. said is its Cloud solution the Thank Ericsson in Acceleration with release I that Yes. be using press will Ericsson I the Intel’s these said recently for million work that Cloud because Silicom eASIC name of announced think the second only could cards. has it cards its mid-band RAN X radio. RAN And technology.

anything So, can about you I that. if say know don’t

Shaike Orbach

I cannot No. comment on that.

Sergi Mascaró

Great. No Okay. worries.

Telecom and Evenstar Infra the about Project. Now

disclosed This Telecom lots here. have Open the that of to Infra RAN. news committed Africa, and quarter, Egypt they others MTN Vodafone, and Telecom we were Project also had

Evenstar is and project I So, this with sure program? Silicom connections. involved Telecom if in am not Evenstar Infra share the Project

Shaike Orbach

am I Evenstar a the mean, Obviously, are understood the part question said, of not we have program. I is. what I sure we as

I participants delivered the a that not significant up have honest. I the are units am this to am program. program expecting It answered whom. sure not long-term going is obviously to decide be I I within to your to be this the what And program year. to am We not they take yet. ready. revenues question, exactly of It’s and from

like to If would was, again to direct that you question I try more to would respond what the accurately. me

Sergi Mascaró

Yes.

of is and like lots between of said that relationship Project. with mean, Telecom any working were Because Africa I or they MTN there Telecom So the Infra companies kind Project? Evenstar Infra Vodafone

So, maybe you could speak about that?

Shaike Orbach

Is between whom? there a relationship

Sergi Mascaró

and Evenstar Yes. Infra Project. Telecom

Shaike Orbach

kind not familiar with of a am relationship. I this

Sergi Mascaró

Okay.

Okay. No worries.

there about Is field announced kind now you since can is away us any in give it months project eight the you field trials? XG year. last trials these update So, of October

Shaike Orbach

with can that. for Yes, still you generation of would the I period has means customers would give decided field into update to postponed be solutions these or we next actually customer of which an beginning. trials in the year. is about field next working are That timelines trials, to updating what do these kind why wanted we The at use, for I say, the the

Sergi Mascaró

more side. the question one And Okay. about tech

behind deployments you the we had XXXX, a quarters. believe FPGA Do for delays During few in that us? are and delays already SD-WAN these

Shaike Orbach

delays? Which

Sergi Mascaró

delays SD-WAN in and in XXXX had for the We a few the Yes. quarters. deployments FPGA

Shaike Orbach

Delays from whom?

Sergi Mascaró

believe you Do these delays… that

Shaike Orbach

Which delays?

Sergi Mascaró

a spoke. for and FPGA. we customers few SD-WAN Yes,

Shaike Orbach

delays the able is goods they now. not wish demand on to in goods, to deliver am obviously, I you significant I any I like that right to But I what right our we sure referring to – the now. I do are mean that the when have customers delay, and can But not not say not any company-wide commit we something like delays delays And talk materials. now, there There deliver about any we am of talking nothing committed. that not day that still, on right our with customers, the due especially them I we cannot that. that dates If are shortages you mean, always delays delays right were the we coming have are sure. of from to about. now, I increasing get or that environment do But the were something not COVID-XX, to not am

Sergi Mascaró

Okay.

right about wins experiencing everyone to So are, you now. is My pricing levels the here And have increase this of prices do if of right you inflation inflation? design are power questions now? the we sustained see inflation speaking

Shaike Orbach

No, Inflation? impact. no

Sergi Mascaró

design we have see the wins if Okay. pricing inflation? the increase of But to prices do you sustained power

Shaike Orbach

not do of partners. And customers. I very our power, we it is issue we pricing closely because for a policy. to if mean, us certain the an customers our reluctant had once with that, of work the an our customers, dependent them work to with power; It’s we issue increase even on we demand, price are become making

do if So, do do we that. power, even we have not the

Sergi Mascaró

question. Okay. And last Thank my you.

RAN Open that the think for seen products? use recently network companies like and that plans an increases you We Nvidia to ASICs Do your semiconductor to model. have Qualcomm large presenting the competition develop support this

Shaike Orbach

increase, the Intel. the other I Nvidia products to players or as or are And competition some Intel say, it’s say we share well. yes, or be teamed planning that whether for half general, I And would market would get if to just happy. our of we by with Well, Qualcomm in maybe that itself that, is that even let us get will very

Sergi Mascaró

Thank well and Okay, Many said. luck. you. best of thanks

Operator

& is ahead. Instructions] of Henderson question Company. [Operator from There Please follow-up Alex Needham a go

Alex Henderson

and things. or has realignment and a the Thanks. and status of your Clearly, and change quo at been Can in Pat an has erosion Intel, been of lot about you a policies like to relative decisions coming Gelsinger architectural and whether programs improvement, over positioning their there talk there? there

Shaike Orbach

I to, in there are we it’s closely would would really We it three Well, divisions Intel. quo. working that with talking in right say, we be with hope general, And status some obviously when means some say, now, within that I I Intel. improvement would areas. mostly Intel, are that say

happen. same hoping them, would to are These I are coming not even the the that kind exactly our not we sure changes, of is possibly some coming within working two did we are able growth and And better. our other be penetration increase, would where others, would partnership There a due is one But where organizational possibly really really, these with experience say, divisions, for of the we relationship. this partnership and are from. areas third where Intel have really that we relationships. growth the is the And to closely So we from. are

Alex Henderson

at in for over terms business seeing you was right you historically seeing a at projects off amount still where right to it handed or good looking them. of fair I the have that relationship they scale projects, they know from do are you scale pipeline see for a you, again that necessarily of coming of Are not what And but the them?

Shaike Orbach

or And is “We mean, them. seeing there are projects – though, that maybe we good I are simply year last said we during still the of even whatever. coming are to a if in first Well, scaling, they scale no high,” of required but see are what saying, because all, line would are if processors they turning you give the correct, we have they their is into resources general, even these before that matter from some Silicom, what, projects

actually names situations high-scalers. with allowing the some the But ones us in another it’s their acting general, they So, to in work only we same them, product in themselves, having go that the are approach, be without them, to yes. which would

Alex Henderson

Thank answers. the appreciate you. I Great. Okay.

Shaike Orbach

you. Thank

Operator

go Sussman from question Bentley next ahead. of Please The Capital. is Robert

Robert Sussman

you you. other not telcos? business heard, I the the one I started slowly. update was at and Thank on think two had the been of this asked, very CPE ahead, all, the but with moving us Last status, has don’t Could one large

Shaike Orbach

terms on up very a a we by least sure I is other recently, It possibility this have that would millions that there and happened is ramping status that up, this we requests I be past that to been even say again – then moving one, certain in begin really to disappointed. slower of And what are and the of is one, still the way, up. would – able is quite in there, and there just so I But it’s that mean, than few So, which forth. but it’s a because it dollars during telco. that ramping slowly. am not second the quarter, so last see got telco are update expected, we at not that and they the coming we selling the slow. with this is to in we ahead, change

relatively these Overall, story. that said, being I CPE would our a telcos two business that old is are booming. Now, say

fastest this already. millions the tens the of which I selling are in of And We is dollars would way. CPEs our is most, say, of the growing area business of

Robert Sussman

Okay, just a up? when two follow-up ramp to potential that, they really of these the what is annual telcos

Shaike Orbach

able the in Well, projects that these we PRs we with it don’t response that I I mean, such to difficult I say. I a have when think now may announced right a started, I know. would included mean, even say I to them even is give the response, and wins. really very been – we presented when

disappointed, extent, them; with to a even full been the one. one certain other to We of have in

you happen potential, SD-WAN received this is would mean, not year, Whether whole, the years or but of telcos, tens again, I tell chance millions last there, of or as a So CPE what if it’s once dollars with each. I rather it’s that years it yes, and But of asking would of potential that these are the the the X then two experience not about the wins would of of happen or X maybe the business very ago, which not you, huge. is we high.

come are potential We before millions could tens flinch now selling of of I saying $XXX for more, a just million even or wouldn’t dollars. there And that right to CPEs.

Robert Sussman

on you an Are basis? saying $XXX annual million

Shaike Orbach

Yes.

Robert Sussman

the the it’s and If products be the with not give idea it? telcos, Okay. us of market CPE can two customers what into an you tell are that selling us you for may who

Shaike Orbach

Well, an the customers. about give we idea cannot

additional the customers with with both these quite There to our we strong and that We with we which with units. have one. issued customers wins several PRs customers few had. are I these which are very a a have as see potential providing examples pipeline of selling we And some

potentially year. come But speaking $XXX to the million, immediately, combining said, immediately, speaking Not these per potential about potential, not about is the of yes, could all not I there. As it month. together, next

Robert Sussman

much. very you Thank Okay.

Operator

further are no this There questions time. at

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

Shaike Orbach

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

Operator

results you for This XXXX you. participation. Silicom’s your Thank call. second concludes conference Thank quarter

You disconnect. may and go ahead

Silicom (SILC) 1 Aug 212021 Q2 Earnings call transcript