Silicom .(SILC) - 2025 Q2 - Quarterly Report

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 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 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] - Growth for 2025 as a whole is expected to be in the low single digits[7] - 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][8] 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 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] - The company is within close reach of its goal of 7-9 Design Wins for 2025 as a whole[8] - Balance sheet remains very strong, with working capital and marketable securities representing ~$20 per share[8] - Optimistic about achieving double-digit revenue growth in 2026 and beyond, targeting EPS above $3 on revenues of $150 million to $160 million[8] - 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] 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 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] - 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] - Products are used by major Cloud players, service providers, telcos, and OEMs as components of their infrastructure offerings[15] - Silicom has over 200 customers worldwide, more than 400 active Design Wins, and over 300 product SKUs[16] 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] - Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures[13] 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 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] - 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] 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] 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] 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 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][9] - Investors could participate via a webcast link on Silicom's website or via dial-in numbers provided for US, Israel, and International callers[9] - A replay of the call will be available for three months from the day after the call[10] Forward-Looking Statements & 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] - 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] - The company disclaims any duty to update such statements, whether as a result of new information, future events, or otherwise[18] Company & 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] - Investor Relations Contact: Ehud Helft, EK Global Investor Relations (Tel: +1 212 378 8040, E-mail: silicom@ekgir.com)[19]