Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Second Quarter 2025 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 EK Global Investor Relations at 1 (212) 378-8040 or view it in the News section of the company's website, www.silicom-usa.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin, please?

Thank you, operator. I would like to welcome all of you to Silicom's quarterly results conference call. Before we start, I would like to draw your attention to the following safe harbor statement. This conference call contains forward-looking statements. Such statements may include, but are not limited to, anticipated future financial and operating results and Silicom's outlook and prospects. Those statements are based on management's current beliefs, expectations and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic and other conditions and are subject to known and unknown risks and uncertainties and other factors, many of which are outside Silicom's control, which might cause actual results to differ materially from expectations expressed or implied in the forward-looking statements. These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on a number of limited customers, the speed and extent to which Silicom solutions are adopted by relevant markets, difficulties in the commercializing and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property, competition, disruptions to manufacturing and sales and marketing, development and customer support activities, the impact of war in Israel and in Ukraine, rising inflation, changing interest rates, volatile exchange rates as well as any other continuing or new effects resulting from the COVID-19 pandemic and global economic uncertainty, which may impact customer demand through customers exercising greater caution and selectivity with their short-term IT investment plans. The factors noted are not exhausted. Further information about the company's business, including information about factors that could materially affect Silicom's results of operations and financial conditions are discussed in Silicom's annual report on Form 20-F and other documents filed by the company and that may be subsequently filed by the company from time to time with the Securities and…

Thank you, Kenny. I would like to welcome everyone to our conference call to discuss the results of the second quarter of 2025. We are pleased with the progress made in the second quarter of 2025 and happy to report another quarter of execution ahead of our strategic plan, including strong Design Win momentum, success across all our product lines and excellent cash flow. Furthermore, we are pleased with our Design Win momentum, which is tracking ahead of our expectations. Since the beginning of the year, we have achieved 5 major new Design Wins with important new customers as well as existing ones, building an impressive mid- to long-term pipeline that puts us with close reach of our goal of 7 to 9 Design Wins for 2025 as a whole. We see Design Wins as the most tangible indicator of our progress as well as our breadth and depth of our Design Win opportunity funnel. The renewed focus on our core product lines, coupled with deep relationships with our customers and potential new customers has created a solid pipeline, positioning us for future growth. We expect to continue to convert this pipeline to further Design Wins throughout 2025 and beyond. We are successfully advancing and meeting our milestones with our various customers and projects and are increasingly optimistic about our ability to achieve double-digit revenue growth in 2026 and beyond, thereby delivering significant value for our shareholders. In terms of the financial results for the quarter, we delivered revenue of $15 million at the midpoint of our guidance range. Our balance sheet has remained very strong. And during the quarter, we increased our cash and equivalents by $3 million. At June end, our working capital and marketable securities totaled $116 million, including $80 million in cash, deposits and highly rated…

Thank you, Liron, and good day to everyone. Revenues for the second quarter of 2025 were $15 million, 4% ahead of the $14.5 million reported in the second quarter of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 74%; Europe and Israel, 16%; Far East and rest of the world, 10%. During the last 12 months, we had one 10% plus customer, which accounted for about 15% of our revenues. I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the noncash compensation expenses in respect of auctions and RSUs granted to directors, officers and employees, taxes on amortization of acquired intangible assets as well as lease liabilities, financial expenses. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the second quarter of 2025 was $4.8 million, representing a gross margin of 31.9% compared to a gross profit of $4.3 million or gross margin of 29.7% in the second quarter of 2024. While I note that our short to midterm expected gross margin range remains between 27% to 32%, we are very pleased with achieving a gross margin at the higher end of this range ahead of our strategic plan model. Operating expenses in the second quarter of 2025 were $7.2 million compared with $6.7 million reported in the second quarter of 2024. Our operating expenses in the quarter were higher than expected due to the relatively weaker U.S. dollar, the currency in which we report versus the Israeli shekel and the Danish krone, the main currencies in which a large portion of our expenses are generated. Operating loss for the second quarter of 2025 was $2.4 million compared to an operating net loss of $2.4 million as reported in the second quarter of 2024. Net loss for the quarter was $2 million compared to a net loss of $0.9 million in the second quarter of 2024. Loss per share in the quarter was $0.35. This is compared with loss per share of $0.14 as reported in the second quarter of last year. Now turning to the balance sheet. As of June 30, 2025, our working capital and marketable securities amounted to $116 million, including $41 million in high-quality inventory and $80 million in cash, cash equivalents and highly rated marketable securities with no debt. That ends my summary. I would like to hand back over to the operator for a questions and answers session. Operator?

[Operator Instructions] The first question is from Ryan Koontz of Needham & Co.

Nice updates on the Design Wins. I wanted to ask about some of your end markets here. I mean, the biggest one appears to be the security market, and that's a key driver for several of your Design Wins across several your sectors here. Are you seeing changes in that market in terms of share shifts among your customers or this recent big acquisition that went down for Palo Alto for Cyber. Do you see consolidation or those affecting your opportunities, either improving or declining opportunities there?

So yes, I mean, you're right, the security market is a very important market for us. And we don't see any impact of that. If anything, we just see the cybersecurity market keeps growing and growing by pretty much every research, I think, and we see evaluation of companies and we see revenues of companies. So we are very happy that we are part of this market, and we don't see anything of that sort due to any consolidation right now.

Great. And I had a follow-up to that, too, about -- I saw that the ADC market also is another important area, and you saw F5's results last night, but they're seeing a real shift away from software-based solutions over -- back to hardware actually. And I wonder if that affects many of your opportunities in the ADC market, as they move to hardware-based solutions a little more predominantly.

I mean -- yes, I mean, the F5 results last night, I think, is a very good maybe reference to see that many, many companies are looking at hardware more and more. I mean -- and we have many new products coming up for this market, if it's post-quantum ciphers, which is a very important thing that will become basically mandatory in the near future. And we have a solution for that to accelerate that over hardware made solutions. In the SASE market, we have many customers as well. And you see this networking plus security market exploding pretty much. Everyone needs hardware, different type of hardware, more acceleration on the hardware side as traffic becomes more challenging, encrypted and quantum encrypted in some cases. We see needs for special switches, and we're definitely working in that area to have interesting products later this year. So we see there's a lot of excitement for us in this market and the opportunities that will come up. And definitely, not only software, as we said, definitely on the hardware side for this market.

Great. And then lastly, just touching on AI. We're seeing a lot of shifts in the kind of big public cloud builders away from traditional cloud infrastructure over to AI clusters, just really large CapEx shifts. And I wonder if that affects many of your market opportunities. I saw you have a very large AI data infrastructure opportunity there and how you think about how AI affects your TAM going forward?

I think it can affect it significantly, and we are looking at that market. We already have several products that fit into this market. And we are thinking more and more and seeing that this -- that the new AI architectures in training and inference, both on the edge and both on the data center requires certain acceleration in certain systems that we are able to build, specifically on FPGA. FPGA could be dramatic here in order to provide solutions that simply do not exist today. And we think we have the right team and the right know- how how to build those products. We're already discussing with potential customers. So this could become significant as well for Silicom.

Great. Maybe one last one, if I can squeeze it in. Just the competitive environment, are you seeing any shifts there or any impacts on your gross margin expectations for the business?

Not so much. Nothing I think we should report at the moment.

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www.silicom-usa.com. Mr. Eizenman, would you like to go ahead with your closing statement?

Thank you, operator. Thank you, everybody, for joining the call and your interest in Silicom. We look forward to hosting you on our next call in 3 months. Good day.

Thank you. This concludes Silicom's Second Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.