Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Fourth Quarter 2022 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.

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

it please have Investor Investor view section not www.silicom-usa.com. you Web contact the Relations the company’s of received or Global If GK it, Silicom’s site News at Relations X-XXX-XXX-XXXX, in team

I like over call to Kenny to begin, to Relations. Mr. hand Global of please? GK Investor like Green, would Mr. now the Green would you

Kenny Green

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

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

in used today's will during company's make by In disclosure addition, and are following results financial the that such Management of measures assessment core basis. be in to current company's this is will this future non-GAAP be the release, useful discussed the non-GAAP presentation the and on these believes future. performance. a of earnings non-GAAP discussed financial non-GAAP forecast call. financials understanding it measures evaluate assumed Such Unless management to non-GAAP measures measures stated, prospects company's call decisions, strategic financial of certain and otherwise investors' for operations ongoing that the should conference today be

Non-GAAP financial provide full investors measures or financial condition measures measures find Silicom's with order disclosed non-GAAP financial are to reconciliation to GAAP and management included These them A as by for provided in method release, for to Website. not in in accordance assessing information alternative GAAP. results. are -- an substitute are our are operating you today's can on earnings a with of which additional

overview Mr. on CEO, Eran of of the CFO. will begin provide the Eizenman, Gilad, will and us today an Mr. followed and line who Liron are with financials. the With Eran results, by Liron the President analysis

then session. question-and-answer the will the We call over turn to

go like would to ahead. the And to call hand Liron, Liron. now I over with that, please

Liron Eizenman

and Thank results. conference call you, Kenny. to our financial to discussing I XXXX of results full would year our welcome quarter all like you fourth

significant issues. against more supply component lot a a to and what EPS quarter another pleased and year capping is all complex has and been the In shortages continued strong revenues, environment the solid report impressive are margins, for chain a of of background particular, this very challenging Silicom. We growth of with

last happy to are $XX.X up over which million, revenue year. XX% quarter We fourth is very growing our performance, with our

XX% year-over-year model was This to For into record our the XX.X% to the last leverage allow full our for million for operating translate net Furthermore, revenue to year demonstrated our in and strong within growth. revenue, year business last to the margin a XX.X% $XXX profit XXXX growth growth year, Silicom. XXXX, versus for XX.X% accelerated by our year. XXXX expanding is growing operating versus XX.X% margin of

and to The share, ago. continued share success customization, double especially to and have X years capabilities. quarter from quick markets that markets, proposition of strong end we products, we profitability, XX% support led understanding per reliable earnings high It more our unique highlights for performance of XXnd the the XXXX that diluted year-over-year products, up value over years, and our including the unmatched only per uninterrupted demand and broad delivery, reported all $X.XX built edge the

need our model for meeting of business success a the a you clear financial leverage our inherent products, is the few we with taken markets XXXX the that while benefit up towards model. our target underscoring groundbreaking Our XX% demonstrate full long-term about shared And margin step margin reach XX% operating we were respective years At net revenue XX%. XXXX, million. was $XXX time, in of year was target target. an and aggressive that and when ago. margin net Back approximately this our our operating in

business demonstrate only The years, the model throughout X XXXX that to we thanks are impressive leverage demonstrated results way, we the in the in well in on our year.

last by quarters. million, currently stands $X up million at position cash since Our approximately $XX

the XXXX, component As during last levels. improve that inventory is we continue fact shortages to assumption in to will explained gradually our and actively I our reduce have quarter, working decided

it will levels in level. the as inventory inventory two behind is in has cash to us. now to expected past And translate and is during decreased and increase quarters decrease directly an quarters are the gradually continue to therefore Peak the ahead,

as in high-level us key significant quickly opportunities existing It not capitalize product available. which our asset allowing strong today's market. readily present to continued us and elsewhere. new enabled a us inventory are themselves. us difficulty attract which have strategic serve and in a This businesses, enables allows products customers it competitive new deliver turn to remains to finding Furthermore, to better, position critical advantage, customers maintain cash Our especially of

I APAC is and would This networking to across a our edge recent for discuss new leader edge important from EMEA, The networking the customers Fortune-XXX and design serves customer SD-WAN a roster. one the win like F. [indiscernible] and Americas, set, was customized was to differentiation options And the win unique market. our win flexible of due connectivity in of edge feature offering XG products. networking our integrated version

opportunities a clear We the our quality up as record for to potential as use opportunities multiple networking proposition win our another edge for pipeline, next We and through point reaching of pipeline can products ramp potential in markets levels for This depth as well edge with significant customers new expect that of orders XXXX offer of deployment in interest cases. now value in is state the XXXX. as beginning well varied generation product. demonstration to we compelling a our the from steady

provider Wins edge that customization a ongoing such as as capabilities product customers choice many support delivery an capability, those platform rapid need. of have with industry established us and

We expect to the driving continue market benefiting company. platform growth to the our strongly for transitions edge multiyear as paradigm,

virtual Telcos, dedicated and various are as vendors for as applications, as more. service vendors, telco and cyber network for all enterprises, providers, SD-WAN, SASE such well seeing products need cloud CPE, edge routing the players,

the those market varied potential we markets, to applications total thought. what driver we As initially for for edge products bigger addressable making target that a had significant are our thus our us, same which and market even attractive clear SD-WAN realized are products, than became initially highly growth broader

We economic Finally, visibility global that component XX% quarter while record, both a in million year-over-year move range the that of terms revenue $XX our quarter expected midpoint first slowdown revenue by of impacted we the of into of of will period the challenging chain to for after all-time of environment a and our XXXX limited year-start our therefore loosening growth range the over represents guidance long is ahead, XXXX. with shortages. The project supply due backlog, million. XXXX between this is $XX the mixed-signal and first

we pleased leverage remain business. growth our proving operation in with our performance profit very throughout strong in summary, growth, a acceleration the year-over-year inherent XXXX and with in significant revenue our In

and We wins. pipeline leading design up strong of tailwinds are a of healthy year-start have customers in future form many maintain design of Furthermore, roster in quality backlog a ramp which early the in level we our wins, highest-ever of stage. the and strong of

see up. to the issue over And year, this we company coming the that put expect easing we shortage is behind Finally, us.

of On the other economic slowdown, emerging our form is end, which global visibility. starting there impact to the in are headwinds

or making push high-level We long decision outs are issued being well cancellations the for cautious the ramp during as there as is processes very as and of increased that by shortage for the potential component period. customers, were orders of up potential longer delayed

in revenue years, that optimistic growth looking are continue. coming at remain All the we double-digit annual compound all, will

healthy a better than total a with never XXXX our into backlog have enter addressable pipeline, we highest-ever positioned. ever, year-start and larger market been we As quality

please to now With hand for ahead. review the Eran, a results. call that. detailed I Eran, of go will the over quarter

Eran Gilad

Thank you, of fourth Liron, last with the XX% year. Revenues million, $XX.X compared reported everyone. revenues million quarter for up quarter of as fourth XXXX hello, of were and the in $XX.X

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

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

GAAP release earlier For non-GAAP refer the to the full issued we reconciliation from numbers, please press today. to

the of XXXX. sold gross $XX.X $XX.X Gross range a XX% in of within profit to was gross the specific gross margin in million, margin margin is of gross of our quarter the of XX.X% XX% a in quarter. profit of gross or XX.X% guidance margin quarter function the of million, and a compared for The XXXX representing product to variance fourth the mix fourth of the

below XXXX to income Operating XX% the in XXXX XXXX. was $X.X $X.X $X.X fourth the as expenses quarter fourth the reported for quarter of income of million, fourth of quarter the quarter Operating of XXXX. the reported were an in million million, fourth of of $X.X in million compared operating increase

quarter. had tax the Please quarter. the in XX.X% the one-time our line higher year tax rate the tax fourth our moving data, is would to income mainly expected mention I rate. net full The in Before to with in is FX tax like rate that high note relatively we the XX% to rate due normal effective

compared income in in fourth was the increase million, is for to The XXXX. fourth EPS an share year-over-year reported increase quarter compared XX% in the quarter This diluted per the of $X.X quarter million $X.XX. were year. earnings with of XX% $X.X a Net of of as of the $X.XX quarter last

sheet. Now turning balance the to

totaled securities ends marketable As million debt, I December and outstanding hand $XX.X of question-and-answer XXXX, cash the would share. company's cash, Operator? per my operator That for to $X.XX with back XX, over summary. session. to no equivalents or the like

Operator

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

Alex Henderson

Great. well environment conservative Thanks so against on a super challenging much, and guide. as the the print as job

is, on So number the a have new of they in little early cautioned that here concerns some the are of potentially ramp the obviously as significant slower backlog a could macro you've conditions. result the given But phases in environment, potentially out resulting environment. either diminished the obvious you ramp, also about or which, of projects of first pushed question macro a being

as progress second, actually committed the we're two to? So the be backlog And balance any have seen of those about thinking how year? the through do we you

Liron Eizenman

So you, first all, thank of Alex.

or But our us customers they every we we're it's how out monitoring of and not to definitely and First day see plans, cancellations XXXX. any push did to something requires speak significant see wanting all, their with understand yet.

up? limited As new big part significant said, into the to questions. be we cancel push Will orders? design the question. as we Will I how we really will customers look ramp wins big are ask XXXX, of outs? mean, Those have visibility. there That's those

for for hard to because a give limited is visibility So XXXX. it's our us definitive answer,

Alex Henderson

some to of that factoring look improvement you that in degree how further thinking into quarter you're is will course you the at availability. said starting in Can to chain the what over And expect to year? side at see much talk the your of that this we improve the point? If the supply do equation, December you

Liron Eizenman

certain have available are able more and but vendors improvement in we right them support continuous. lead to and So parts more time see not Things have improving, of the will shorter other cases, are some certain and all better availability, less available. now vendor parts

need be But we the So is do decreasing to the continues with XXXX, that focus finding all that and continuing will, work the it that time. number time. during parts are at to finding on and We all better. some the expect in but normal. we think exactly us our it of solutions alternatives know the to assumption in And is for be better we But almost will when don't hard do for when. say sure, XXXX, I the to not year, point, QX it become exactly later to back will it

Alex Henderson

we How essentially flat it? about thinking level modeling And then but still about Shekel at relative ranges. mode. should bounced in in the be mode, equation OpEx bit, a do costs it? How to job it's OpEx your OpEx managed have historical looking here, of little you've pretty And a be we the we think of investment containment at 'XX. obviously, to we the side 'XX do how around in low fabulous Should -- do

Liron Eizenman

should exchanges same. we rate expect to be changes, definitely I we exchange maintain it. those mean, -- assuming significant the think it I

Alex Henderson

good the on interest line … cash news. That's And does then Great.

Liron Eizenman

to be it Alex clarify, was XXXX. about we -- to Just the not $XX Alex, not about same, around clarify, sorry. thinking million, the just model, expect to I

Alex Henderson

And should XXXk we that each the watermark interest and up going Right. benefit interest quarter, on seeing an posted the I your balances, -- cash the then balances in that's higher be on line, rates increase the cash year? December below Is see. quarter? given of for the from that you the

Eran Gilad

other of is it. the rate with a yield, words, than year the financial or investing top In ago, yields higher are its yields by income On dependent indeed, from about necessarily. Not right better exchange income in activities, our no differences. impacted now question presented P&L the largely the

predict However, income in now. to exchange rate the number. is factor is a big financial right hard Therefore it

Alex Henderson

flat, ought the the that rates over line stay assumption say to higher course be off to timeframe? Assuming interest of would that the then be of. the work I most exchange Would that think fair the 'XX be people

Eran Gilad

That's correct. That's correct.

Alex Henderson

And to then these at Okay. Right. term even the in the they cede in of going need And coming whatever that one macro pipeline, I'll looking are how a floor. be The XX companies timeline nature, environment longer recession And months projects are or most last out a is, question. of does Or does those in in still projects this we Do what the pipeline kind contract your in terms the year look next expect shouldn't them? meaningful be against the wins contracts? to the the of anticipating first where wins? see is the of you larger down half the timing slow of point environment? to that

Liron Eizenman

good From a pipeline perspective, we have a pipeline. very

that we opening busy sales definitely said economy. know and I see or our our very, eventually, a think more in will it the exactly see words. especially we a will pipeline team global centers very We all the still very those I very ago I set network the from a data those time, I products. pipeline, don't our see equipment our up more all see in edge Yes, pushing -- that [ph] or is minutes good edge, we But more enterprises, for pipeline, depends ramp and few equipment we on very in in how fast and towards addressing companies opportunities. still think and more still needing need.

Alex Henderson

won what can timing [Indiscernible] say wins different opposed the have have about it, as it. of flow existing wins? already -- Obviously, addressing already projects curve hand. that's of large new specific in that to ramping to been to of how business, a new But pipeline news

Liron Eizenman

But don't The we'll I’m and will deployment the question. that's wins, I working, project a them. wins, we'll that of see But deals, of see from those nature they're quickly and big and closing up ramp a see don't necessarily slowly Definitely a how getting I that of its how question. the actual has be sure, big the slowdown. projects, more working Deployment, company wins necessarily get will we we will see a see on the -- point or moving. is it. the that. mean, Each slowdown we in own getting

Alex Henderson

are question. located all or your customers there difference translate Obviously, One pretty the the the at but in products any going, last customers, it of that look display I If of behaving they located? different in similarly this at geographies, into behavior geographic is time? where doesn't are

Liron Eizenman

but of they behaving to that. business, mainly special are but doing more that. think not function markets now. mean Obviously, I see economically, other nothing the I we a than own culture, say, -- it's right with and beyond way specific than differently geographic each I don't would culture used its markets

Alex Henderson

thanks. Right, the I'll floor. cede

Operator

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

Alex Henderson

myself nobody I continue. was but else queuing, to was hoping queue, is else somebody going

the the any terms do of given you improvement other utilizing of stock volatility buybacks flow, anticipate Given market, the cash environment? in in -- we that about activity think this how cash in use in the cash should or

Liron Eizenman

our the still to components, moment be use right the now, don't that for other feel have And Still, do for at would we cash, uncertainty for we we able so. need best that. it use to if any inventories to given for plans the

Alex Henderson

That right. Thanks. our was last All question.

Operator

is Next The Mark Shawn Boyd go question Please of ahead. Capital. from next

Shawn Boyd

Thanks you the for taking question. okay? me hear Can

Liron Eizenman

Yes, we can.

Shawn Boyd

and get the want for this me. I quarter. one to Just gross to margin back [indiscernible]

year? mix, two product that Thank is that into the on call previous something And that kind in that but quarters? of of you XX%, saw move XX% bit that? that we think to continues just Or you half first also, back do a this can coming level we you. elaborate I the

Eran Gilad

same change will any the the that now. believe to XX in right to we're in to see going be still We XX. range we be still range. see the reason So We don't

Liron Eizenman

your does Shawn, answer that question?

Shawn Boyd

Thank Yes. it. got I got you. I it.

Liron Eizenman

you. Thank

Operator

at are no There time. further this questions

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

Liron Eizenman

Silicom. Thank time. on look hosting you, call for our for you joining in day. months operator. forward next the Thank and interest everybody Good to you X in your We call

Operator

Thank results Thank participation. you. This your XXXX quarter you concludes conference call. for Silicom's fourth

and ahead go may You disconnect.

Silicom (SILC) 30 Jan 232022 Q4 Earnings call transcript