Silicom (SILC) 30 Jul 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Second Quarter 2022 Results Conference Call. All particpants’ are present in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

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

of received Global contact or Investor in news not team Investor view have www.silicom-usa.com. the EK website, at Relations section you it, Silicom's please Relations it If company's the at X-XXX-XXX-XXXX I would the Mr. hand call to like now to over Green, Investor Relations. Global EK Kenny Mr. you would begin, please. Green, to like

Thank all you would to Conference Silicom's welcome I you, Results to Second Call. operator. like of Quarter XXXX

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

be GAAP. provide of for an Eizenman, overview information Mr. with Eran, to alternative GAAP which the an financial will financials. can financial the on and CFO. to release, us full non-GAAP in by a and of of assumed this investors of Management management line be the In addition, operations, the used earnings disclosed substitute for certain condition by accordance and financial on are otherwise measures investors' With followed to of performance. assessing call operating website. presentation the should useful with results. forecast company's to and today These Silicom's -- in are it that during non-GAAP of press these financial discussed today's who non-GAAP measures such CEO; will Liron Gilad, GAAP financial in of measures believes following or Non-GAAP prospects ongoing assessment measures our core additional make management by a are measures Liron financial decisions, These are non-GAAP strategic in future. conference as measures non-GAAP basis. non-GAAP to the financial the Mr. measures them the Eran call. financial evaluate find you company's disclosure analysis be results future in understanding on current the not are included President order the method today's will reconciliation company's results, begin sorry, to and provided release, for A financial will this stated, Unless are non-GAAP measures that provide

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

Silicom my of subsidiary. their our to conference quarter call the confidence after CEO ability results. results discussing success many our Silicom This thank working to American like would you is of for build Chairman. I still My as of Kenny. and I Board lead XXXX many CEO COO has as to to of and second Silicom to CEO, over he like quarter financial you, welcome North Thank all involved in Executive would our aim years as to Orbach, Silicom my Vice remains is in for Silicom the our upon years. continue ahead. former the brought Shaike first

short a quarter. provide results to Now the the of of summary

pleased continued with solid our quarter are for XXXX. very second performance the We of

period to record a range year-over-year the for product, quarter-end backlog EPS, levels of and was by at quarter XX% second at the margins second stands for center for revenue We revenues, coupled our demonstrated driven our Silicom. stronger-than-ever in operational $XX attention efficiency. of million demand guidance quarter. The with growth growth to expected Furthermore,

continues decoupled networks driving demand the report our income providers from transition revenue players XXth accelerating giants net to growth was service with and of solutions. and Our million, continued online reflect retail very of are improved and enabling to and we With year-over-year. of significantly industrial quarter to mainstream telcos to operating Silicom's gross disaggregated which up pleased XX% profitability margins, for $X.X

resulted earnings year-over-year. significant of that share in increase of per XX% All very $X.XX, a

not and rate the determined those product all revenues for results have of and been would for inventory been face We're maintaining despite the the are shortages shortages in the component pleased higher. continued careful supply delivery innovation management. And tight strong of chains. primarily ongoing more us global the a had operational and with We background strongly it shortages, through

able maximizing in our component worked hard available shows have and very what revenue, solid we half for The manufacture operating that, margins now strong year-over-year availability is growth growing our range. strong we our we full in global shortages been improvement the improving XXXX. not growth has strong where and know, -- components an component market strong the us, Using is you indeed the shortages news global on to and ultimately in situation. assumption broad we're demand The to our improvement manufacturing of possible and across and readily gross more have customers, profit the to overcome As deliver first are that product internal to processes, is and appears worsening it exceptionally successful. is component product good stabilized during that and working of

last discussed our While highest ever reaching quarter, backlog. we

available of designed our backlog QX by been market high other. backlog maintain that inventory level increased provide attracting and growth long-term this the new easily point have which I new are our on and inventory we out competitive strategy customers an level to a position the in one components global the allows today difficulty We better, and return. parts. driven of coming us delivering which further. support products end, inventory quarters serve the this expected strategic component strategic and of upcoming I availability to to on customers want part. finding product see has product to record we strongly as ensure was asset significant experiencing hand existing and It internal our that move on advantage. elsewhere. The excellent business, is a market, As our It increased are sales will while and In shortages not demand today's

declining and in the shortages. our expectations, we allow of to in the development towards component our start year-end, will few will peak inventory we on that depending forward ongoing terms coming months it the believe In

already purchase industrials a XG/O-RAN trends to companies $XX to markets the significantly of products company order those market, customer new success they the in and makes the approach. in for markets At in product confidence of as further days about early see still initial their level per for platform. market phase. edge trends customers. one future market years, telcos types to vote level to whereby segment the a history. most service believe one million time, and market that Discussion and continues In developing IT in. regarding as discuss and endorsed full still to potential, which of we're exciting providers reflecting of that SD-WAN our it's notably, telcos we the market We its we capitalize our a like decoupling, opportunities. sectors the disaggregation leading decoupling well The very the with the of An U.S. would last performance, year been the innovation, unparalleled SD-WAN active largest our the edge market methodology. by on built all in have has we partners current most and SD-WAN especially demand the reflects customer, recent products, and which circle the at the optimistic with a the new million providers, expect of win We European of contributes adopting with This to I are our continue wins the in both our and of same insignificant design of that equipment phase. the play into our introduction announced telcos transitions and existing retail in broad in part architecture disaggregation several the major as edge. next of informed and remains win capabilities quality, Smart have adopting. of provide order us growth $XX as market one placed major a We of the of service that for telcos, disaggregated years. in solutions, May. of business recent in networking The increasingly in to XG/O-RAN including acceleration is booming fast-growing which we early variety us our revenues, The several the in strong is global the our from vendors which customers to competitive this features SD-WAN general, demonstrated in recent This

provider strategy this disaggregated wins We when more and us market Silicom the predicted, with becoming each trend positioning of and confirms in we for larger today's data decoupled five will initiated in tomorrow's as for momentum the feedback blocks every SD-WAN and this design ago, growing now we growing continue, enabling that network. mainstream and of As is years from a building quarter. musthave architectures, our space believe driving

third our the to indeed that to this been the quarter our success between growth our higher. XX% for of would which of as we and component note forecast it. million, and midpoint level quarter, at growth situation, represents approximately continued our takes of third growth no the significantly been in In I $XX over expect of million such situation guidance into at continued with Has XXXX. would terms revenues mitigating $XX show of estimates that there the account shortages have rate the

the our of shortages, and growing, we with first ongoing performance us by the focus our markets component we sheer our our in In are we at had developing despite in fastest-growing the speed which predicted as long believe pipeline the as the continue our summary, the and stand positioned on to multi-year of remain very second strong deep which pipeline some the positioned we which More pleased expectations. and correctly of the ourselves growth. size well for markets makes trends, remain for Given are under XXXX. optimistic. space, broadly, we half further Even our and quarter networking

given all continued despite challenges reputation forward, the record level to quarterly Looking our a I will hand which for can results. with the ahead. in and as of our pipeline well that, provider developing, go rates target the the double-digit we positioned Eran, speed call the compounded markets a are are by our detailed all-time deliver of review over please With compound years growth for ahead. Eran now

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

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

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

product of representing of Net the as Operating of net diluted $X.XX, last XXXX quarter margin an with XX%, in second The of compared gross XXXX. XX.X% to margin press was of $XX.X increase, gross gross mix of today. XXXX for in the margin was per we XX.X% representing Gross million of $X.XX second were XX%, a a representing in million, increase specific of quarter For is a compared to margin the margin XX% release million, the in share the to second were quarter. compared the quarter XXXX. quarter expenses and in the an reported the second operating $X.X of a non-GAAP XX.X% of in $X.X of guidance increase at a the please of gross $XX.X million, XX% of of the quarter the the $X.X the top compared of profit an quarter to GAAP in second net and of range or of million Earnings Operating for the second variance compared XX% second in function and $X from of to issued quarter XXXX. as reported numbers, to in million million, income income income full quarter gross second the EPS of quarter XXXX. for margin the XXXX quarter reconciliation operating XX%, our earlier second to income refer of million sold $X.X the $X.X was of year. profit of reported

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

we and & is [Operator begin Needham go gentlemen, question-and-answer session. Thank Alex of question Instructions] Henderson Please first you. ahead. the will Ladies Company. The from

with bring major I products but rather driver been a And to clear of newer Well, CEO successful. start direction statement. deserved. the like well has development on the the that. a not to you and job, move a correct company's let Liron, and congratulations question, up a understand that of off of company seems the It's me with clearly certainly so been you've it

Thank you very much, Alex.

Hey more than welcome.

price international just strong little of tremendously Obviously, because talk implies your a the to is other wanted in dollars, cost where I But of revenues major to shekel weak the about from challenge a OpEx dollar based it side currencies you the a increase equation the little to bit So benefit and customers. are. the also bit.

actually So the OpEx, of they're down not $XXX,XXX at for decline. numbers I'm the looking and expected quarter, that on we had kind June really which

sales all G&A? whether be I into blip year. marketing up will and think should go talk we items, about second you a and half as wondering that temporary of declines could three So if How the was that's again the it about we in R&D, and the

Yes, absolutely.

would pretty our since right is don't here but it's So We're in pretty remains us to may the significant the have the we can really with the I structure future, design too increasing right mean is is the more. not now much impact be much the hard impact But and dollar or dollar definitely the we'll the now, know for dollar. same. what increase predict say much itself. same And the if not structure we to that answer I decreasing,

of same the be front quarter? the is half the we year year the level in the about the of of in using in half June back should So spending or

would the it's the of from the level be itself, expect dollar yes, Silicom, going answer investment in Again, a I function is but to would Yes, the be that. same.

should flat fairly dollar, So stable. assuming sequentially it a be

four, XX.X% five going Obviously, been assuming Obviously, normalizes Okay, that quarters Should predominantly to back back the had pop, back last that it you nice in driven by you've that's the by gross be the towards a XX%. doing mix. level half? we margins. returns and --

be been expect to still to we range. So We've same in XX% XX%. in always the

a a to higher, to specifically, there in still go of believe we're of -- range little same caused bit quarter This but products that XX%. mix was XX% was the we it

in of Juniper, a and the example. companies an lot networking speaking, Cisco macro as people just are primary Broadly from with headwinds right. the All dealing issue Extreme, that are

lot little intention how systems is by they're of delayed companies are in wins, bit macro backlogs know have? you So had a that be versus their they? Can firm those to you slow major and of hard that for deployments but And about of product leaders the the has easily because a stretched. How projects that of the down What on that that's been have gives it talk deferred, implications are lot or project driven projects U.S.-centric were running backlog about of the could that environment. and XX% a a or insulation. it to revenues really in way of to you annual maybe the much the I you same macro programs telling as continue deploy international? versus components from XXX% schedule guys them specifically, the isn't projects

see what highest that moment, least the QX that, one. quarter, the it's shows bit We're fact see do We're our mean, that impact, highest feeling at we moment, we the all our what demand see immediate and at on the and the and see ever but customers that for status any I also last now immediate with we say the And than and is an don't any at ever said backlog are at the the And on discussing we that even we they openly So monitoring think backlog highest specifically moment. not again that. we impact don't very time. more we again. we the have impact hard we quarter, the hearing see.

are plan So they what today, is that our their and that that with plans continuing And we from to continue have the we means the to come and we customers with with in that talk orders continue came what see in. them. --

annual scope seeing of -- XX% you're of backlog plausible A is that sales providing looking think of large their of are XX% product order to at product backlog? the how it sense in to a business. get relative Is the on the lot Just companies to numbers to in clarify it to backlog.

numbers, the don't can tell you the not I exact we're growth those exact provide that significant, previous quarter from providing was quite While we but numbers.

on right. just as you Can and more the of talk rates. your receivables? costs operating about exchange All in terms how well question shekel as One hedged both you're

is do simple. did answer hedge -- We very anything. we The not

Right.

sharp benefit decline the why from come you're in So and immediately down. shekel the has that's OpEx your

Exactly.

forward? on Any we as line the share thoughts count rate interest tax move or in change income

No, the no average, to in believe in the range. percentage was change. lower, Indeed, the somewhat compared the but still we XX% quarter around tax

will I queue. All point, right. the floor back Great. the see I'll but into this at come

So if there's additional opportunity to talk.

let’s next move question. the Operator, onto

from is Please question Cobia Jeff go next The from ahead. Capital. Meyers

you. a on guys. Congratulations Thank quarter. nice Hi,

you a any during the had Just quick how quarter? question. Did much? back buy guys if stock And so,

Yes, plan this ended How plan, million. buyback the the about quarter. in April it third $XX.X in much was buyback total

And to I guess, is a that, I there see. renew forward? thought going

can So when them to that the to build order what's at with look the moment, is feel at it the that plan cash, to that be in do we and to customers.So best our our the so into in our and we our use products we moment. for can we position that the inventory, thing best best at cash is build provide

Thank okay. you, it, Got guys.

to move the questions. let’s Operator, next

from next Boyd the Next go Please ahead. is Capital. Mark Shawn of question Yes,

Good morning. Can you hear me, okay.

Yes.

Great. but bookings. here understand with you I numbers backlog, can the help not perhaps giving exact we're on us

and think your all? the And continuing ebbed at you that rolls your quarters as as the what's macro is that on pipeline here. out going in past how couple do strong into bookings they QX? Given of be in over to your Or were? excitement Are

the it's and with before, and especially said So see see customers yes, which with that our less up. collected again lot customers believe believe to our we're to we strong. up we customers very We're that we will now traveling we are what quarters, ramp some over few wins consistently. more. a the all design feel continue even pipeline. with ramp mean, as And And last more very that the it we starting discuss that, We some speaking to meeting -- doing we obsessed we they're yes, face-to-face, and I feel our I

believe we our backlog. strongly So and very pipeline our in in

good. very good, Very Okay.

to that kind about P&L the to that there. and the to thinking So taking and level starting see next going shipments of product

has constraints, no stabilized, On the worsening. the you component longer mentioned situation that

of Can color gives that level, maybe and on guess that? the be tells give start a just think bad seeing Now if in specifically confidence on not better. that at getting we're you you more are kind they're can QX, see we'll helpful. you us I What more exactly you give that? any but you What us those but I easing would constraints that color heard you right, to ease? it later QX

see hope the that not at now. our see easing worse. end XXXX, all, will to until improvement flat of remain first of it So now it's is least, it not that and in is year XXXX, we that see remain assumption the We yet. seeing going what but least getting it's at we'll that worse, for assumption that We start and it will we and as be right hopefully is our don't right

with understanding on component see And not the be, all the flat times happen the to we So lead distributors, an talking trying assumption, now manufacturers the get the kind they down and or improvement. is, market. work market suppliers, what in Do their suppliers, I understand talking now see still? based other -- to times in we product. with and with of seeing lead going of XXXX the as outs of say, XXXX, And believe the way Are flat? worse they the market, they again, that up we push what with with talking to just or going covenants will get of our backlog. of let's lot that about Silicom's talking of understand is in we vendors, a talking said And in to are that, with is the suppliers' availability going for see is and the hope we

go macro line major any have just and Have And cancellations? said, where delays okay, where had you do and where plans. going going to revamp just had we're this so they time to Okay. far, by have you is We're we're you these they've this along last any the are elsewhere where not given component going that weaker customers wins constraints to basically pulled question program. off they've just caused these

for not the big Definitely programs.

here there, insignificance situation. some of is near nowhere but major and design have may none our wins You the

Very guys. color, additional thank And you good. for the

Shawn. Thank you,

Thank you.

a Henderson of Next question Please question follow-up is Needham & Alex from ahead. Company. go

hoping a bit a environment have in, it's with And little the But time. doing long stable, the to that to have offset extent that's assume dollars seeing to when you're you because inflation that when? be that And staffing, are talk about compensation. to the the you Great. I side? various company. employment seen people also of what churn there do any know you're churn? What on very acceleration geographies in and tend compensation increases leads strong was bonus I you annual Obviously, history in creating I

should how the backdrop? So given about up the think we going compensation

continuing we market, are significant to with compared with we pleased significant or understand we situation. that at and expect perspective, policy to on we mean, us on and the certain what the continue to that had of where impact or from all, compared compensation we much perspective, around P&L mean very see I that. always any we very We anything that from companies, are pleased would the pretty but don't I to with say, sort. churn the And do see I bonus not we're see even a

correct? compensation is is annual and the The reviews escalation quarter, in that March generally

but changes year year-end, I it to it on -- year-end, definitely it mean, from year at it but do sometimes. at we the do depends we Usually,

but of us to Okay. market FPGAs. I for you a FGA back there those with products? the with about -- been that it. And there? your that context on complicated, what's you going any the has going little to traction talk PGA improvement put bit your side know hard Are with into semi any components Can been it's seeing Has

I there's mean there. a definitely few developments Yes.

very our work Intel continue on that. with close We

Definitely, we wins last have to maybe some products but -- turning opportunities COVID should the we opportunities than well. We as we've areas unable they're here, growth to to business, so customers, are smaller some some we some suppliers as months. managed to that there over expect to but some came mentioned, few other some And growth as see us. growth, of their part do there our other be there the of be provide definitely

of around nice the Clearly line. seasonal less Another and pretty seasonal likely. Should then make be trajectory being that question supply fourth the bit quarter. think, pop over pattern as the fourth the of as and March I constraints fourth into top equation, thinking decline pattern of of which about continuation sequential much the quarter not a of the you've the that a much a driven as of in maybe demand pop course a year Historically, be more quarter should the much thinking or as How the the quarter. little we supply quarter is, the more piece we in had softer chain the a first than about driven?

I same much We pretty expect do huge pop continue, not rate. coming say, the it to in. We a at see would

all QX As I the want. and to chain situation products all said, build do we'll expect supply that need have components the not we we in the that that to ease completely we suddenly,

it's seen at So much do to expect the there's to level XXXX. to is we same going growth. be be chain. so going think be -- in We It's supply not pretty far. that before going we've Significant

similar pretty of seen much to what we've I to this as So expect growth far. trend continue so

is the we lack quarter, that of relatively that Or something that sequential again? the anticipate parts quarter? seasonality which that full Is into seen, the of has been decline smoother steep. that first that So availability historically should make you've first the into

at about us our moment the for it's are. think say QX, to I early too expectations what

Thanks. [indiscernible]. Right,

Herald from is Johnston Investment. Robert from question go next The Please ahead.

the you about more demand-wise. the could about there? to Would what two landscape you're bit more you a Good you're seeing little talk product bit And seeing areas competitive morning. and what also, talk and want there a

Yes. Sure.

So first about of Edge. I'll the all, talk

our is Edge relationship this as we all few professional including probably the crazy to doing We've advantage, last products one And our that's vendors, there, years, over highest that -- or engineering as We're in see redesigns we have. to growing the definitely to years very few growth have that of we and So problems very we it close the main think for our significantly Silicom next solve environment us seen supply team, in drivers to an issues, one going quite well. our with go. the time, forces the problems. of fastest-growing which domains we supply ability the be of

growth. a more customers of a to good area, area, this that more All in us. that We work in our we definitely design wins that which innovation very we continue. have to we and continue position believe lot want of us this has put with see with in believe and will And also makes

for assuming the As other et media, It's in the XG developing. in really cetera, as of stages, you're referring or what O-RAN, market the the phase or is that early that to area, everyone in the many knows are deployment. telcos the everything that now I'm reports POCs initial

little few lot that little -- and grow So a next of we're edge definitely earlier even But it a discussed I think over the for that a of the market, bit those, minutes years. we before. will market also part a few it's than

two or? the Terrific. anything And in competitively markets, incremental

the whenever I sort see advantage. the knows a of in anything very we definitely, in that there's, think are Everyone become are we specifically, I that Edge mid RFP mean, Silicom mean, an -- we there. that mean, I name. I we market mean bidding, or I known domain have

broad a products. of have range We

for O-RAN the roadmap.Same market. a have XG We strong and goes

it. we So strong feel very about

other supply? of are for customers your single are so and Silicom how they source looking versus having terms providers doing consistent sources multiple a in a And

and us in making supply customers us with with a But fact the positioning that obviously, our customers way obsession products gives to and there come advantage. able definitely, an go competition that competition and there, are are we to cases, order well. Well, there fact but only Silicom market, in we the that in one are first the products innovative definitely, is relationship the to our in vendors the the happy we and is our And there. many we're are with market with the our close and our provide long very not that we

Okay. of or Pricing, it's components up going or? a stable with shortage

But I not still significant same making from that. remain so that. would in range. -- same changes margins, we in impact can due we see we're the We significant no we are think you our to the to mean, range, as So

Yes.

but you what I can seeing competitively that, -- there? wondering you're was You see

not a suffering that. challenging environment, from the we're definitely. It's And only ones

trust Our to to do competition the also a customers where customers the trying are are right until is in the of perspective, long-term. well. so can in are at and yes. they as are similar from able on least so challenging of it suppliers from a now I will or the think environment the it's price But And best. end -- is deliver situation very a yes, a measuring, and later remain all those perspective, supply us think And who who that I year a situation,

of component the timing? on thought up? Is up more? when is is your really I ramp O-RAN. just milestone Last what it mean, Or hit it market in to a you but -- enable to going Is starts the it early, is terms be starting is ramp I just availability? mean, think bit question, it what so there this Great. XG just to to to to mainstream, do start --

side, don't telco wouldn't O-RAN. think here factor. a and XG There's the approach who it's interested components. the is versus -- in say I that technology world, I looking telcos a ramping want combination. is CapEx think not It's and not limiting And is this single mean, I are that the I into OpEx up. a in But on very many one it's adopt. there's to it's the

to a see more at and stages, I bigger, But XXXX doing we as they're I be beyond. big looking what it's think guys still, them are and some bit more them some early on. to said, XXXX seeing for that. will more a but deployments of days very to still XXXX, little will less, try advanced in follow Some it's later and start

much. Thank you very

Thank you.

next is Boyd Next ahead. Instructions] The [Operator Mark of Capital. from follow-up go question Please question a Shawn

the follow-up. there? I'll should had quick end Real that? component the through helping in keep there? in of I it on And you drop that about see little to these inventory have you talk And how that the Can indicated you the Thanks the up we bit of built brief. start think deep of constraints? what trajectory a year. for working kind But what's terms of is just by exactly in build.

Sure.

easy metal is fighting it entire of or most been the to have industry build struggling we which the get. are parts that So to we've electronic short that electronic time that can components, that's not It's because other things get. the where parts quickly most. It's lead and is parts

weeks time those to of strategy a of more and inventory we lead this can our XX has react our been and Some customers. support build so have parts and

around we what it now year, end then until if peak, continue for the we And going the a market end ease think of kind mainly But we would it's we of that some year go we inventory. find now we little we to will say, that's you’ll and it probably depending the on levels. be So be but will and we're start in XXXX, to of inventory towards evolve, down. back how a the longer going -- flat the and are to the the and right still at are expect I that as now, right will to think towards of high then a normal point, while go dropping think seeing the

build me Last operating help working incremental we'll for certainly capital. And it. is Got your margins. question

something year half think the last has Is versus about if year, forward? year. go wins about margins that been XX% think math like constraints quarter-to-quarter, number rough last for a then about good at can And of help. it about seems this these the same. certainly going Just first of it even start half bounces ramp, Or and component Because operating incremental higher? but first we around to design would to scale

margin. operating -- So about incremental XX% operating just talk the

model, really in to factors dollar order We the and to other need have look some in at we but leverage the understand where going. it's

enough. much so Thanks Okay. Good gentlemen.

you. Thank Operator?

Company. question from of Henderson & ahead. next Needham Please The is Alex go

Yes.

quick more one Just one.

you metrics any to have supplier the the key the seen seen relative any quarter? you of quarter last the situation decommits? current decommits during one is supply and Have from What's chain. over So

to in maybe happen product a flat And Those a for the customers. and saying either still we're out. a customer. we mean by still towards happens to for that that yes, exist lower does are of Yes. the and push is I time-to-time, from we're a getting but from bit at solution an we products number that, reality, to definitely. getting is the we than point. the get certain push to with It an day different deliver it that it what supply when end of or start the every not redesign alternative decommit got rates still still, the continue now not situations we at to -- is or even it's battle uphill not year little and proposing until But a we're situation still, just XXXX, component maybe this I our on expect and not outs in chain, mean previous it But we that means find that time-to-time, mean, we're quarters. higher

Right.

in decommits surprises this So the as No have quarter, far? been third in so expected. time, there at point

is decommit many every get, decommits but a say. probably, not I as to how surprise, would we Well, surprise a it's

you. Thank

are There questions at further no this time.

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

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

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

ahead disconnect. go may You and