Accessibility StatementSkip Navigation The customer selected Silicom due to the cutting-edge features of its FPGA-based Smart Card technology, coupled with the Company's track record over many years as a trusted supplier and technology partner for many industry leaders. KFAR SAVA, Israel, Sept. 29, 2025 /PRNewswire/ -- Silicom Ltd. (NASDAQ: SILC), a leading provider of networking and data infrastructure solutions, today announced that an application delivery market leader has awarded it a Design Win for an ...

Core Insights - Silicom Ltd. has secured a new design win that is expected to increase annual sales to a key customer to approximately $4 million [1] - The partnership with the customer has expanded over time, showcasing the value of Silicom's diverse product portfolio [2][3] Company Overview - Silicom Ltd. is a leading provider of high-performance networking and data infrastructure solutions, primarily aimed at enhancing performance and efficiency in Cloud and Data Center environments [4] - The company's solutions are designed to improve throughput, reduce latency, and enhance the performance of servers and networking appliances [4] Product and Market Position - Silicom's products are utilized by major Cloud players, service providers, telcos, and OEMs, serving as components in their infrastructure offerings [5] - The company has established long-term relationships with over 200 customers globally, with more than 400 active design wins and over 300 product SKUs [6]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $15 million, a 4% increase from $14.5 million in Q2 2024 [20] - Gross profit was $4.8 million, with a gross margin of 31.9%, compared to $4.3 million and 29.7% in the previous year [21] - Operating loss remained at $2.4 million, with a net loss of $2 million compared to a net loss of $900,000 in Q2 2024 [22][23] Business Line Data and Key Metrics Changes - The company secured three significant design wins across its major product lines, including FPGA SmartNICs and high-performance NICs, indicating strong performance across all sectors [10][11] - The design wins reflect the breadth of the product portfolio and the depth of customer relationships, contributing to a solid growth foundation [11][14] Market Data and Key Metrics Changes - Geographical revenue breakdown showed North America at 74%, Europe and Israel at 16%, and the Far East and rest of the world at 10% [20] - The company reported a 110% plus customer contributing about 15% of revenues, indicating strong customer retention and growth potential [20] Company Strategy and Development Direction - The company aims for double-digit revenue growth in 2026 and beyond, supported by a robust pipeline of design wins and strong cash flow [9][18] - The focus on core product lines and deepening customer relationships is expected to create reliable and diversified revenue streams [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the cybersecurity market's growth and its impact on business opportunities, indicating no negative effects from market consolidation [26][27] - The company is also exploring opportunities in the AI infrastructure market, with products designed for new AI architectures [31][32] Other Important Information - The company maintains a strong balance sheet with $80 million in cash and no debt, allowing for continued investment in growth [10][23] - The expected revenue range for 2025 is between $15 million and $16 million, with growth anticipated in the low single digits for the year [17][18] Q&A Session Summary Question: Changes in the security market and impact on opportunities - Management noted that the cybersecurity market continues to grow, with no negative impacts from recent consolidations [26][27] Question: Impact of ADC market shifts towards hardware solutions - Management acknowledged the trend towards hardware solutions and highlighted upcoming products for the ADC market [28][29] Question: Effects of AI on market opportunities - Management indicated that AI could significantly affect market opportunities, with ongoing discussions about products tailored for AI architectures [31][32] Question: Competitive environment and gross margin expectations - Management reported no significant shifts in the competitive environment affecting gross margin expectations [33]

Financial Performance - Q2 2025 revenue was $15 million, with a gross profit of $4.8 million (31.9% of revenues), resulting in an operating loss of $2.4 million (negative 15.7% of revenues) and a net loss of $2 million (negative 13.1% of revenues)[26] - H1 2025 revenue reached $29.4 million, with a gross profit of $9.1 million (31.1% of revenues), leading to an operating loss of $4.8 million (negative 16.2% of revenues) and a net loss of $4.1 million (negative 13.8% of revenues)[27] - The company holds $79.7 million in cash and cash equivalents and boasts a strong balance sheet with $121.7 million in stockholders' equity[28] - The company's working capital stands at $100.5 million[28] Strategic Focus - The company aims to achieve an EPS of $3+ as revenues return to the $150-160 million range[14] - The company plans to secure 7-9 new Design Wins (DWs) annually[14] - The company is targeting double-digit annual growth rates starting in 2026[14] Market and Customer Base - The company has a large global customer base with 200+ customers and 400+ active Design Wins[7] - North America accounts for 74% of the company's last twelve-month revenues[12, 13] - EMEA represents 16% of the company's last twelve-month revenues[12, 13] - APAC contributes 8% of the company's last twelve-month revenues[12, 13]

Financial Results - Silicom's revenues for Q2 2025 were $15.0 million, a 3.4% increase from $14.5 million in Q2 2024 [2] - On a GAAP basis, the net loss for Q2 2025 was $3.3 million, or $0.59 per share, compared to a net loss of $1.5 million, or $0.25 per share, in Q2 2024 [2] - On a non-GAAP basis, the net loss for Q2 2025 was $2.0 million, or $0.35 per share, compared to a net loss of $0.9 million, or $0.14 per share, in Q2 2024 [3] - For the first half of 2025, revenues were $29.4 million, up from $28.9 million in the first half of 2024 [3] - The GAAP net loss for the first half of 2025 was $6.1 million, or $1.08 per share, compared to a loss of $4.9 million, or $0.80 per share, in the first half of 2024 [4] - On a non-GAAP basis, the net loss for the first half of 2025 was $4.1 million, or $0.71 per share, compared to a loss of $3.2 million, or $0.52 per share, in the first half of 2024 [4] Guidance - Management projects Q3 2025 revenues to range from $15 million to $16 million [5] - Growth for 2025 is expected to be in the low single digits, with a double-digit annual growth rate anticipated to begin gradually in 2026 [5] Management Comments - The President and CEO highlighted strong Design Win momentum and success across all product lines, achieving 5 major new Design Wins since the beginning of the year [6] - The company has a strong balance sheet, with working capital and marketable securities representing approximately $20 per share [6] - The Design Win funnel is broad, with opportunities for Edge systems, Smart NICs, and FPGA-based solutions [6] - The company expects to achieve double-digit revenue growth in 2026 and aims for an EPS above $3 on revenues of $150 to $160 million [6]

[Executive Summary](index=1&type=section&id=executive_summary) Silicom reported mixed Q2 and H1 2025 financial results with slight revenue increases but significantly widened net losses, while management projects Q3 revenues of $15M-$16M and targets double-digit annual growth from 2026 [Q2 & H1 2025 Financial Performance](index=1&type=section&id=q2_h1_2025_financial_performance) Silicom reported mixed financial results for Q2 and H1 2025. Revenues saw slight increases, but net losses widened significantly on both GAAP and non-GAAP bases compared to the prior year periods Q2 2025 vs Q2 2024 Financial Highlights (GAAP & Non-GAAP) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | | **GAAP:** | | | | | Sales | $15.0M | $14.5M | +$0.5M | | Net Loss | $(3.3M) | $(1.5M) | -$1.8M | | EPS (basic & diluted) | $(0.59) | $(0.25) | -$0.34 | | **Non-GAAP:** | | | | | Net Loss | $(2.0M) | $(0.9M) | -$1.1M | | EPS (basic & diluted) | $(0.35) | $(0.14) | -$0.21 | H1 2025 vs H1 2024 Financial Highlights (GAAP & Non-GAAP) | Metric | H1 2025 | H1 2024 | Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | | **GAAP:** | | | | | Sales | $29.4M | $28.9M | +$0.5M | | Net Loss | $(6.1M) | $(4.9M) | -$1.2M | | EPS (basic & diluted) | $(1.08) | $(0.80) | -$0.28 | | **Non-GAAP:** | | | | | Net Loss | $(4.1M) | $(3.2M) | -$0.9M | | EPS (basic & diluted) | $(0.71) | $(0.52) | -$0.19 | [Q3 2025 & Future Guidance](index=1&type=section&id=q3_2025_%26_Future_Guidance) Management projects Q3 2025 revenues between $15M and $16M. Low single-digit growth is expected for full-year 2025, with a target of double-digit annual growth from 2026, aiming for EPS above $3 on $150M-$160M revenues - Management projects revenues for the third quarter of 2025 to range from **$15 million to $16 million**[7](index=7&type=chunk) - Growth for 2025 as a whole is expected to be in the **low single digits**[7](index=7&type=chunk) - A **double-digit annual growth rate** is expected to materialize gradually from 2026, leading to an **EPS above $3** on revenues of **$150 million to $160 million**[7](index=7&type=chunk)[8](index=8&type=chunk) [Management Commentary](index=2&type=section&id=management_commentary) CEO Liron Eizenman highlighted strong Design Win momentum with 5 major new Design Wins in H1 2025, nearing the 2025 goal of 7-9, and expressed optimism for double-digit revenue growth from 2026 driven by a broad Design Win funnel [CEO Remarks and Strategic Outlook](index=2&type=section&id=ceo_remarks_and_strategic_outlook) CEO Liron Eizenman highlighted strong Design Win momentum with 5 major new Design Wins in H1 2025, nearing the 2025 goal of 7-9. He emphasized a strong balance sheet and an optimistic outlook for double-digit revenue growth from 2026, driven by a broad Design Win funnel across Edge systems, Smart NICs, and FPGA-based solutions - Achieved **5 major new Design Wins** since the beginning of the year, building an impressive mid-to-long-term pipeline[8](index=8&type=chunk) - The company is within close reach of its goal of **7-9 Design Wins** for 2025 as a whole[8](index=8&type=chunk) - Balance sheet remains very strong, with working capital and marketable securities representing **~$20 per share**[8](index=8&type=chunk) - Optimistic about achieving **double-digit revenue growth in 2026 and beyond**, targeting **EPS above $3** on revenues of **$150 million to $160 million**[8](index=8&type=chunk) - The Design Win funnel is broader and wider than ever, with opportunities for Edge systems, Smart NICs, and FPGA-based solutions with both current and new customers[8](index=8&type=chunk) [Company Overview](index=3&type=section&id=company_overview) Silicom Ltd. is an industry-leading provider of high-performance networking and data infrastructure solutions, utilizing non-GAAP financial measures to provide additional insights by excluding specific items like share-based compensation [About Silicom](index=3&type=section&id=about_silicom) Silicom Ltd. is an industry-leading provider of high-performance networking and data infrastructure solutions, enhancing Cloud and Data Center efficiency. Their solutions, including high-density networking, fabric switching, offloading, and FPGA-based technologies, are utilized by major Cloud players, service providers, telcos, and OEMs globally - Silicom Ltd. is an industry-leading provider of high-performance networking and data infrastructure solutions[14](index=14&type=chunk) - Solutions are designed to improve performance and efficiency in Cloud and Data Center environments, supporting advanced Cloud architectures and technologies like NFV, SD-WAN, and Cyber Security[14](index=14&type=chunk) - Products are used by major Cloud players, service providers, telcos, and OEMs as components of their infrastructure offerings[15](index=15&type=chunk) - Silicom has over **200 customers worldwide**, more than **400 active Design Wins**, and over **300 product SKUs**[16](index=16&type=chunk) [Non-GAAP Financial Measures Explanation](index=3&type=section&id=non_gaap_financial_measures_explanation) The company presents non-GAAP financial measures, which exclude specific items like share-based compensation, taxes on amortization of acquired intangible assets, and lease liabilities - financial expenses (income), to provide additional insights alongside GAAP results. These measures are not a substitute for GAAP - Non-GAAP financial measures exclude compensation expenses for options and RSUs, taxes on amortization of acquired intangible assets, and lease liabilities - financial expenses (income)[13](index=13&type=chunk) - Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures[13](index=13&type=chunk) [Financial Statements](index=4&type=section&id=financial_statements) Silicom's balance sheet shows decreased assets and increased liabilities, while Q2 and H1 2025 operations reflect slight sales growth but widened GAAP net losses, with non-GAAP adjustments [Consolidated Balance Sheets](index=4&type=section&id=consolidated_balance_sheets) Silicom's total assets decreased slightly to $147.8 million as of June 30, 2025, from $150.4 million at December 31, 2024. Current assets decreased primarily due to a reduction in marketable securities and accounts receivables, while current liabilities increased Consolidated Balance Sheet Highlights (US$ thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $52,301 | $51,283 | +$1,018 | | Marketable securities (current) | $11,993 | $20,860 | -$8,867 | | Total current assets | $118,741 | $129,790 | -$11,049 | | Total assets | $147,813 | $150,409 | -$2,596 | | Total current liabilities | $18,214 | $15,092 | +$3,122 | | Total liabilities | $26,087 | $22,570 | +$3,517 | | Total shareholders' equity | $121,726 | $127,839 | -$6,113 | - Current marketable securities decreased significantly from **$20,860 thousand** at December 31, 2024, to **$11,993 thousand** at June 30, 2025[21](index=21&type=chunk) - Total current liabilities increased from **$15,092 thousand** to **$18,214 thousand**, driven by increases in trade accounts payable and other accounts payable and accrued expenses[21](index=21&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=consolidated_statements_of_operations) For Q2 2025, sales increased slightly to $15.0M from $14.5M YoY, but GAAP net loss widened to $3.3M from $1.5M. For H1 2025, sales were $29.4M (up from $28.9M YoY), with GAAP net loss increasing to $6.1M from $4.9M. Operating expenses increased across R&D, S&M, and G&A for both periods Q2 2025 vs Q2 2024 GAAP Financial Performance (US$ thousands, except per share) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | | Sales | $15,019 | $14,502 | +$517 | | Gross profit | $4,715 | $4,263 | +$452 | | Total operating expenses | $7,871 | $7,387 | +$484 | | Operating income (loss) | $(3,156) | $(3,124) | -$32 | | Net income (loss) | $(3,337) | $(1,516) | -$1,821 | | Basic and diluted EPS | $(0.59) | $(0.25) | -$0.34 | H1 2025 vs H1 2024 GAAP Financial Performance (US$ thousands, except per share) | Metric | H1 2025 | H1 2024 | Change (YoY) | | :------------------------------------ | :------ | :------ | :----------- | | Sales | $29,404 | $28,867 | +$537 | | Gross profit | $8,990 | $8,302 | +$688 | | Total operating expenses | $15,361 | $14,889 | +$472 | | Operating income (loss) | $(6,371) | $(6,587) | +$216 | | Net income (loss) | $(6,143) | $(4,948) | -$1,195 | | Basic and diluted EPS | $(1.08) | $(0.80) | -$0.28 | - Income taxes shifted from a benefit of **$(921) thousand** in Q2 2024 to an expense of **$304 thousand** in Q2 2025, contributing to the increased net loss[23](index=23&type=chunk) [Reconciliation of Non-GAAP Financial Results](index=6&type=section&id=reconciliation_of_non_gaap_financial_results) Non-GAAP adjustments primarily involve adding back share-based compensation, lease liabilities - financial expenses (income), and taxes on amortization of acquired intangible assets. These adjustments resulted in a lower net loss compared to GAAP, with Q2 2025 non-GAAP net loss at $1.97M (vs $0.86M YoY) and H1 2025 non-GAAP net loss at $4.07M (vs $3.23M YoY) Q2 2025 vs Q2 2024 Non-GAAP Financial Performance (US$ thousands, except per share) | Metric | Q2 2025 Non-GAAP | Q2 2024 Non-GAAP | Change (YoY) | | :------------------------------------ | :--------------- | :--------------- | :----------- | | Non-GAAP gross profit | $4,789 | $4,313 | +$476 | | Non-GAAP operating income (loss) | $(2,364) | $(2,427) | +$63 | | Non-GAAP net income (loss) | $(1,971) | $(861) | -$1,110 | | Non-GAAP basic and diluted EPS | $(0.35) | $(0.14) | -$0.21 | H1 2025 vs H1 2024 Non-GAAP Financial Performance (US$ thousands, except per share) | Metric | H1 2025 Non-GAAP | H1 2024 Non-GAAP | Change (YoY) | | :--------------- | :--------------- | :--------------- | :----------- | | Non-GAAP gross profit | $9,141 | $8,413 | +$728 | | Non-GAAP operating income (loss) | $(4,755) | $(5,140) | +$385 | | Non-GAAP net income (loss) | $(4,072) | $(3,233) | -$839 | | Non-GAAP basic and diluted EPS | $(0.71) | $(0.52) | -$0.19 | - Total adjustments for Non-GAAP net income (loss) were **$1,616 thousand** for H1 2025, primarily from share-based compensation (**$1,465 thousand**) and lease liabilities - financial expenses (income) (**$455 thousand**)[25](index=25&type=chunk) [Additional Information](index=2&type=section&id=additional_information) This section provides details on Silicom's conference call, outlines forward-looking statements and associated risks, and lists company and investor contact information [Conference Call Details](index=2&type=section&id=conference_call_details) Silicom's management hosted a conference call on July 31, 2025, at 9 am Eastern Time to discuss the results. Details for webcast and dial-in were provided, with a replay available for three months - A conference call was hosted on **July 31, 2025, at 9:00 am Eastern Time** to review and discuss the results[8](index=8&type=chunk)[9](index=9&type=chunk) - Investors could participate via a webcast link on Silicom's website or via dial-in numbers provided for US, Israel, and International callers[9](index=9&type=chunk) - A replay of the call will be available for **three months** from the day after the call[10](index=10&type=chunk) [Forward-Looking Statements & Risks](index=3&type=section&id=forward_looking_statements_%26_Risks) The release contains forward-looking statements subject to known and unknown risks, including dependence on a limited number of customers, market adoption speed, commercialization difficulties, competition, operational disruptions, geopolitical events (Gaza, Ukraine, Red Sea), inflation, interest rates, and global economic uncertainty. The company disclaims any duty to update these statements - Statements in this press release that are not historical data are forward-looking statements, involving known and unknown risks and uncertainties[17](index=17&type=chunk) - Risk factors include dependence on a limited number of customers, market adoption speed, difficulty in commercializing products, competition, disruptions to operations, and geopolitical/macroeconomic factors such as wars, inflation, and interest rates[17](index=17&type=chunk) - The company disclaims any duty to update such statements, whether as a result of new information, future events, or otherwise[18](index=18&type=chunk) [Company & Investor Contacts](index=3&type=section&id=company_%26_Investor_Contacts) Contact information for Silicom's CFO, Eran Gilad, and Investor Relations, Ehud Helft of EK Global Investor Relations, is provided for inquiries - Company Contact: Eran Gilad, CFO, Silicom Ltd. (Tel: +972-9-764-4555, E-mail: erang@silicom.co.il)[19](index=19&type=chunk) - Investor Relations Contact: Ehud Helft, EK Global Investor Relations (Tel: +1 212 378 8040, E-mail: silicom@ekgir.com)[19](index=19&type=chunk)

Core Insights - Silicom Ltd. has secured its first Design Win with a US-based provider of Edge-based networking solutions, which is expected to generate an annual run rate of approximately $1 million, with potential for significant multi-million-dollar scale-up [1][2][3] Group 1: Design Win and Revenue Potential - The customized Edge device is set to enhance scalability, security, and efficiency for the customer, with deployment expected by the end of 2025 and full ramp-up in 2026 [2] - The customer is pursuing additional sizeable projects using the same Silicom Edge device, each with potential revenues of $1 million or more, indicating a strong opportunity for revenue growth [3][4] - The ongoing discussions for another customized Edge product could represent additional sales potential of several million dollars per year [4] Group 2: Company Background and Market Position - Silicom Ltd. is recognized as a leading provider of high-performance networking and data infrastructure solutions, primarily aimed at improving performance and efficiency in Cloud and Data Center environments [5] - The company has established long-term relationships with over 200 customers globally and has more than 400 active Design Wins, positioning it as a preferred partner for technology leaders [6][7]

Company Overview - Silicom Ltd. is an industry-leading provider of high-performance networking and data infrastructure solutions, primarily designed to enhance performance and efficiency in Cloud and Data Center environments [4] - The company's solutions aim to increase throughput, decrease latency, and boost the performance of servers and networking appliances, which are essential for advanced Cloud architectures and technologies like NFV, SD-WAN, and Cyber Security [4] - Silicom's products are utilized by major Cloud players, service providers, telcos, and OEMs, serving as components in their infrastructure offerings [5] Upcoming Financial Results - Silicom Ltd. will release its second quarter 2025 results on Thursday, July 31, 2025 [1] - A conference call is scheduled for the same day at 9:00am Eastern Time, where management will review the results and answer investors' questions [2] - Investors can participate via a webcast link on Silicom's website or through designated teleconferencing numbers [2] Customer Relationships and Market Position - The company has established long-term relationships with over 200 customers globally, with more than 400 active Design Wins and over 300 product SKUs [6] - Silicom is recognized as a preferred connectivity and performance partner for technology leaders worldwide [6]

Core Insights - Silicom Ltd. has secured a significant FPGA Smart NIC contract with a Fortune 500 cloud-based service provider in North America after a year-long technical evaluation process [1][2][3] - The company is customizing the card to meet the customer's specific requirements, with initial deliveries expected to start at the end of 2025 and ramping up through 2026, projected annual revenues from this contract are estimated at $4 million [2][3] - Silicom's CEO highlighted the performance advantages of their technology, which helps customers manage increasing data volumes and security risks, and expressed optimism about expanding the partnership for additional components and systems [3] Company Overview - Silicom Ltd. specializes in high-performance networking and data infrastructure solutions aimed at enhancing performance and efficiency in cloud and data center environments [4] - The company's products are utilized by major cloud players, service providers, telcos, and OEMs, serving as both add-on adapters in data centers and stand-alone devices at the network edge [5] - Silicom has established long-term relationships with over 200 customers globally, with more than 400 active design wins and over 300 product SKUs, positioning itself as a preferred partner for technology leaders [6]

PART I [Key Information](index=6&type=section&id=Item%203.%20KEY%20INFORMATION) The company faces significant risks in business, operations, and stock, including dependency on 'Design Wins' and market shifts [Risk Factors](index=6&type=section&id=D.%20Risk%20Factors) The company faces substantial business, operational, geopolitical, and financial risks impacting its performance and stock - Business growth is heavily reliant on securing **'Design Wins' with no guarantee of conversion to revenue**, and faces risks from the rapid evolution of Cloud and Edge markets[37](index=37&type=chunk)[39](index=39&type=chunk)[43](index=43&type=chunk) - Operational challenges include **long sales cycles and short order lead times**, alongside dependency on single-source suppliers like Intel, posing supply chain risks[48](index=48&type=chunk)[63](index=63&type=chunk)[105](index=105&type=chunk) - A small number of customers account for a significant portion of revenues; in 2024, the **top three ultimate customers represented 34% of total revenues**[119](index=119&type=chunk)[121](index=121&type=chunk) - Operations are exposed to **geopolitical and military hostilities in Israel**, and the potential loss of 'Preferred Technological Enterprise' tax benefits would increase taxes[65](index=65&type=chunk)[69](index=69&type=chunk)[81](index=81&type=chunk) - The company was the target of a **cyberattack from Iran in November 2024**, though it believes no damage was caused[150](index=150&type=chunk) - The company's stock faces **delisting risk from NASDAQ** if the minimum bid price is not met and a substantial risk of being classified as a **Passive Foreign Investment Company (PFIC)**[94](index=94&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) [Information on the Company](index=34&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) The company provides high-performance networking solutions through a 'Design Win' model with outsourced manufacturing and key supplier dependencies [History and Development of the Company](index=34&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Founded in 1987, the company is listed on NASDAQ (SILC) and has grown through key acquisitions and internal investment - The company was incorporated in Israel in 1987 and its shares are listed on the NASDAQ Global Select Market under the ticker 'SILC'[153](index=153&type=chunk)[154](index=154&type=chunk) - Key acquisitions include Fiberblaze A/S in December 2014 and assets of ADI Engineering, Inc in September 2015 to expand its product offerings[154](index=154&type=chunk)[155](index=155&type=chunk) Capital Expenditures (in thousands USD) | Year | Total Capex | Machinery & Equipment | Office Furniture & Equipment/Leasehold Improvements | | :--- | :--- | :--- | :--- | | 2024 | $1,395 | $1,379 | $16 | | 2023 | $1,276 | $1,162 | $114 | | 2022 | $2,120 | $1,993 | $127 | [Business Overview](index=35&type=section&id=B.%20Business%20Overview) The company provides networking and data solutions for Cloud and Edge environments, with a focus on a long-term 'Design Win' model - Silicom's core business is providing high-performance networking and data infrastructure solutions to improve efficiency in Cloud, Data Center, and Edge environments[159](index=159&type=chunk)[160](index=160&type=chunk) - Product categories include **Server Adapters**, **Smart Cards** for task offloading, and **Smart Platforms** for Edge deployments like SD-WAN and SASE[162](index=162&type=chunk)[163](index=163&type=chunk)[168](index=168&type=chunk) Geographic Sales Distribution | Region | 2024 Sales % | 2023 Sales % | 2022 Sales % | | :--- | :--- | :--- | :--- | | North America | 76% | 85% | 72% | | Europe | 16% | 13% | 23% | | Asia-Pacific | 8% | 2% | 5% | - The company's marketing strategy is centered on the **'Design Win Model'**, a lengthy evaluation process aimed at securing long-term purchasing commitments[179](index=179&type=chunk)[180](index=180&type=chunk) - Key competitors include **Nvidia, Intel, and Broadcom** for Server Adapters and a more fragmented market for its Smart Card and Smart Platform products[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Organizational Structure and Property](index=44&type=section&id=C.%20Organizational%20Structure) The company operates through two wholly-owned subsidiaries in the US and Denmark and leases all its global facilities - The company has two wholly-owned subsidiaries: Silicom Connectivity Solutions, Inc (USA) and Silicom Denmark (Fiberblaze A/S) (Denmark)[208](index=208&type=chunk) - Silicom does not own real property and leases all its facilities, with key offices and manufacturing sites in Israel, Denmark, and the USA[207](index=207&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk)[213](index=213&type=chunk) [Operating and Financial Review and Prospects](index=46&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) The company experienced a significant sales decline and net loss in 2024 due to customer inventory destocking but maintains strong liquidity [Operating Results](index=47&type=section&id=A.%20Operating%20Results) Sales plummeted 53.2% in 2024 due to customer inventory depletion, leading to a net loss, though gross margin improved Key Financial Performance (in thousands USD) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Sales | $58,114 | $124,131 | $150,582 | | Gross Profit | $16,598 | $28,689 | $51,956 | | Gross Margin % | 28.6% | 23.1% | 34.5% | | Operating Income (Loss) | ($13,278) | ($28,674) | $19,926 | | Net Income (Loss) | ($13,708) | ($26,413) | $18,306 | - Sales in 2024 **decreased by 53.2% YoY**, primarily due to the negative impact of excess inventories held by customers[223](index=223&type=chunk) - The 2023 net loss of $26.4 million was heavily impacted by a **$25.6 million goodwill impairment** and a **$5.3 million intangible asset impairment**[241](index=241&type=chunk)[227](index=227&type=chunk) - **Gross margin improved in 2024 to 28.6%** from 23.1% in 2023, mainly due to a different product mix and the absence of prior year one-time impairments[225](index=225&type=chunk) - Research and development expenses decreased by 5.5% in 2024 to $19.5 million, mainly due to a reduction in the number of employees[228](index=228&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with sufficient cash to fund operations, bolstered by positive operating cash flow in 2024 Key Liquidity and Balance Sheet Items (as of Dec 31, in thousands USD) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Working Capital | $114,698 | $122,251 | | Cash and cash equivalents | $51,283 | $46,972 | | Inventories | $41,060 | $51,507 | | Trade Receivables | $11,748 | $25,004 | - Cash provided by operating activities was **$18.3 million in 2024**, a significant turnaround from cash used of $31.9 million in 2023[249](index=249&type=chunk) - The company believes its cash and cash equivalents are **sufficient to fund its operating needs** for at least the next twelve months[250](index=250&type=chunk) [Research and Development, Patents and Licenses](index=52&type=section&id=C.%20Research%20and%20development,%20patents%20and%20licenses,%20etc.) The company continues to invest in R&D, holds several key patents, and no longer has royalty obligations from past government grants R&D Expenses (in thousands USD) | Year | R&D Expense | % of Sales | | :--- | :--- | :--- | | 2024 | $19,508 | 33.57% | | 2023 | $20,638 | 16.63% | | 2022 | $20,563 | 13.66% | - The decrease in 2024 R&D expenses was mainly due to a **reduction in employee headcount** and favorable currency exchange impacts[267](index=267&type=chunk) - The company holds patents for its 'Server-Based Network Appliance' and 'Hybrid Networking Application Switch'[257](index=257&type=chunk)[262](index=262&type=chunk) - All government grant programs from the Israel Innovation Authority (IIA) have been closed, and the company **does not expect to pay any further royalties**[264](index=264&type=chunk) [Trend Information](index=54&type=section&id=D.%20Trend%20Information) Industry shifts to the Cloud drive demand for Smart Cards and Edge devices but reduce demand for traditional Server Adapters - Positive trends like the shift to the Cloud and disaggregation are **increasing demand for the company's Smart Cards and CPE/Edge devices**[269](index=269&type=chunk)[274](index=274&type=chunk) - The same trends are causing a **gradual decrease in demand for traditional Server Adapters** as customers move toward standard hardware[272](index=272&type=chunk) - Near-term headwinds include customers depleting large inventories and high interest rates delaying new infrastructure projects[276](index=276&type=chunk) - In February 2024, the company launched a **6-year strategic plan** to focus on core product lines and diversify its customer base[277](index=277&type=chunk) [Directors, Senior Management and Employees](index=57&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board practices, and a recent reduction in its workforce [Directors and Senior Management](index=57&type=section&id=A.%20Directors%20and%20Senior%20Management) The company is led by an experienced management team, including the Active Chairman, CEO, and CFO - Key leadership includes Avi Eizenman (co-founder and Active Chairman), Shaike Orbach (Executive Vice Chairman), Liron Eizenman (President and CEO), and Eran Gilad (CFO)[284](index=284&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Compensation](index=59&type=section&id=B.%20Compensation) Executive compensation combines salary, benefits, and equity, with significant new option grants issued in 2024 2024 Compensation for Top 5 Paid Office Holders (USD) | Name | Position | Salary and Benefits | Equity-based Compensation | | :--- | :--- | :--- | :--- | | Avi Eizenman | Active Chairman | $499,674 | $624,708 | | Liron Eizenman | President and CEO | $318,743 | $896,433 | | Eran Gilad | CFO and Company Secretary | $243,670 | $104,490 | | David Castiel | VP Engineering | $218,508 | $104,490 | | David Hendel | VP R&D | $203,115 | $104,490 | - The aggregate direct remuneration for all directors and office holders in 2024 was **$2.847 million**[304](index=304&type=chunk) - The company's Global Share Incentive Plan (2013) was extended in October 2023 for another ten years[307](index=307&type=chunk) - In March 2024, the company granted **410,714 options at an exercise price of $16.42**, following the expiration of numerous out-of-the-money options[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) [Board Practices](index=62&type=section&id=C.%20Board%20Practices) The board has a staggered structure, follows NASDAQ independence rules, and operates with an approved executive compensation policy - The Board of Directors is staggered, with directors divided into three classes, each elected for a three-year term[323](index=323&type=chunk) - The company opted out of Israeli 'external director' rules and instead complies with **NASDAQ requirements for independent directors** and committee composition[341](index=341&type=chunk) - The Audit Committee is chaired by Ilan Erez and is responsible for financial oversight and approving related-party transactions[343](index=343&type=chunk)[348](index=348&type=chunk) - The company has an **Executive Compensation Policy**, last approved by the board in June 2022, which includes a clawback provision[321](index=321&type=chunk)[360](index=360&type=chunk)[364](index=364&type=chunk) [Employees](index=77&type=section&id=D.%20Employees) The company's workforce has been significantly reduced over the past three years, with the majority of employees based in Israel Employee Headcount by Year (as of Dec 31) | Category | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Total Employees** | **229** | **246** | **306** | | Marketing, Sales, Customer Services | 21 | 25 | 27 | | Research & Development | 118 | 125 | 134 | | Manufacturing | 76 | 80 | 127 | | Corporate Operations and Administration | 14 | 16 | 18 | - As of March 31, 2025, the company had 230 employees, with the majority based in Israel, 30 in the U.S., and 35 in Denmark[376](index=376&type=chunk) - The company considers its employee relations to be excellent and has never experienced a labor dispute[376](index=376&type=chunk) [Share Ownership](index=78&type=section&id=E.%20Share%20Ownership) Directors and office holders as a group beneficially own 5.07% of outstanding shares, with the Chairman holding the largest stake Share Ownership of Directors and Office Holders (as of March 31, 2025) | Name / Group | Number of Shares and Options Owned | Percent of Outstanding Shares | | :--- | :--- | :--- | | Avi Eizenman | 277,418 | 4.79% | | All directors and office holders as a group | 293,318 | 5.07% | [Major Shareholders and Related Party Transactions](index=79&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) Major institutional shareholders hold significant stakes, and related party transactions primarily involve executive compensation agreements Major Shareholders (>5%) as of March 31, 2025 | Shareholder | Percentage of Outstanding Shares | | :--- | :--- | | Systematic Financial Management, LP | 8.96% | | First Wilshire Securities Management, Inc. | 6.86% | | Forsakringsatiebolaget Avanza Pension | 5.86% | - Related party transactions focus on compensation for key executives, including salary, bonus, and severance agreements[388](index=388&type=chunk) - In March 2024, the Board approved **new option grants to the CEO and Chairman** to replace prior expired grants, with the CEO's grant approved via board 'override'[390](index=390&type=chunk)[391](index=391&type=chunk) - A framework was approved in June 2024 to grant RSUs to the Executive Vice Chairman for his ongoing sales support[392](index=392&type=chunk) [Financial Information](index=82&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) The company is not party to any material litigation, has suspended its dividend policy, and reports no significant post-balance sheet events - The company is not currently a party to any material litigation[396](index=396&type=chunk) - The company's dividend policy was **suspended on March 15, 2018**, and remains suspended until further notice[397](index=397&type=chunk) - No significant changes have occurred since the date of the annual financial statements included in the report[398](index=398&type=chunk) [The Offer and Listing](index=83&type=section&id=Item%209.%20THE%20OFFER%20AND%20LISTING) The company's shares trade exclusively on the NASDAQ Global Select Market (SILC) and have shown significant price volatility - The company's ordinary shares are traded on the **NASDAQ Global Select Market under the symbol 'SILC'** and were delisted from the TASE in 2016[400](index=400&type=chunk)[401](index=401&type=chunk) Annual Share Price Range (USD) | Year | Low | High | | :--- | :--- | :--- | | 2024 | $11.35 | $19.04 | | 2023 | $13.75 | $50.00 | | 2022 | $31.30 | $51.66 | | 2021 | $36.02 | $59.27 | | 2020 | $20.93 | $42.55 | [Additional Information](index=84&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section details the company's corporate governance, Israeli tax considerations, and the risk of PFIC classification for U.S. shareholders - The company operates under its Articles of Association and the Israeli Companies Law, which governs its corporate structure[404](index=404&type=chunk)[411](index=411&type=chunk) - As a foreign private issuer, Silicom's corporate governance practices **differ from NASDAQ standards for U.S. companies** in several key areas[444](index=444&type=chunk)[445](index=445&type=chunk) - The company benefits from reduced Israeli corporate tax rates under the **'Preferred Technological Enterprise' status**, with rates as low as 7.5%[452](index=452&type=chunk)[464](index=464&type=chunk)[467](index=467&type=chunk) - For non-Israeli shareholders, dividends are generally subject to a **25% withholding tax**, which may be reduced by an applicable tax treaty[494](index=494&type=chunk)[495](index=495&type=chunk) - There is a risk the company could be classified as a **Passive Foreign Investment Company (PFIC)** for U.S. tax purposes, leading to unfavorable tax treatment for U.S. shareholders[498](index=498&type=chunk)[499](index=499&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=106&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are foreign currency exchange fluctuations and credit risk from its investment portfolio and customer concentration - The company's investment portfolio of **$27.7 million** as of Dec 31, 2024, consists of fixed-rate corporate and government debt securities[527](index=527&type=chunk) - Primary market risk is **foreign currency fluctuation** (USD revenues vs. NIS and DKK expenses), for which the company does not engage in hedging[530](index=530&type=chunk)[536](index=536&type=chunk) - A hypothetical **10% weakening of the U.S. dollar** in 2024 would have increased operating expenses by approximately **$2.3 million**[535](index=535&type=chunk) - Credit risk exists from the investment portfolio and customer concentration, with the **top three customers accounting for 34% of 2024 revenues**[538](index=538&type=chunk)[539](index=539&type=chunk) PART II [Controls and Procedures](index=109&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2024 - Based on an evaluation as of the end of the fiscal year, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[545](index=545&type=chunk) - Management assessed internal control over financial reporting using the COSO framework (2013) and concluded that it was **effective as of December 31, 2024**[547](index=547&type=chunk) - The company's registered public accounting firm provided an attestation report on management's assessment of internal control over financial reporting[548](index=548&type=chunk) [Corporate Governance and Other Matters](index=110&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers audit committee expertise, accountant fees, share repurchases, and cybersecurity risk management governance - The board of directors has determined that two members of the audit committee qualify as **audit committee financial experts**[553](index=553&type=chunk) Principal Accountant Fees (USD) | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit Fees | $120,000 | $120,000 | | Audit-Related Fees | $7,630 | - | | Tax Fees | $36,000 | $22,454 | | **Total** | **$163,630** | **$142,454** | - The company has an active share repurchase plan, with approximately **$10.6 million remaining available for repurchase** as of December 31, 2024[559](index=559&type=chunk) - The company has adopted an insider trading policy that prohibits insider trading and establishes blackout periods and pre-clearance procedures[564](index=564&type=chunk)[565](index=565&type=chunk) - The Board of Directors oversees cybersecurity risk and states that a **November 2024 cyberattack has not materially affected** the business[571](index=571&type=chunk)[572](index=572&type=chunk) PART III [Financial Statements](index=116&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section contains the audited consolidated financial statements, which received an unqualified opinion from the independent auditor Consolidated Balance Sheet Highlights (in thousands USD) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$150,409** | **$167,734** | | Cash and cash equivalents | $51,283 | $46,972 | | Marketable securities (Current & LT) | $27,699 | $24,576 | | Inventories | $41,060 | $51,507 | | **Total Liabilities** | **$22,570** | **$19,472** | | **Total Shareholders' Equity** | **$127,839** | **$148,262** | Consolidated Statement of Operations Highlights (in thousands USD) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Sales | $58,114 | $124,131 | $150,582 | | Gross Profit | $16,598 | $28,689 | $51,956 | | Operating Loss | ($13,278) | ($28,674) | $19,926 (Income) | | Impairment of goodwill | $0 | $25,561 | $0 | | Net Loss | ($13,708) | ($26,413) | $18,306 (Income) | | Diluted EPS (USD) | ($2.277) | ($3.942) | $2.694 | Consolidated Statement of Cash Flows Highlights (in thousands USD) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $18,288 | ($31,925) | ($4,090) | | Net cash from investing activities | ($4,280) | ($7,517) | $8,273 | | Net cash from financing activities | ($9,881) | ($7,973) | ($1,051) | - The independent auditor, Kesselman & Kesselman (PwC Israel), issued an **unqualified opinion** on the financial statements and internal controls[588](index=588&type=chunk)[596](index=596&type=chunk)[597](index=597&type=chunk) - In 2023, the company recorded a **full goodwill impairment of $25.6 million** and an intangible asset impairment of $5.3 million[607](index=607&type=chunk)[637](index=637&type=chunk)[638](index=638&type=chunk) - The company repurchased **$9.9 million of its own shares in 2024** and $9.3 million in 2023 under its share buyback program[605](index=605&type=chunk)