Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Fourth Quarter and Final 2023 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 1212378-8040 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?

Yes. Thank you, operator. I would like to welcome all of you to Silicom's Fourth Quarter 2023 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 of Silicom's control, which might cause actual results to differ materially from expectations expressed or implied in the forward-looking statements and which include, but are not limited to, Silicom's increasing dependence of substantial revenue growth on a limited number of customers, the speeding extent to which Silicom solutions are adopted by the relevant market, difficulty in commercializing and marketing of Silicom products and services, maintaining and protecting brand recognition, section of intellectual property composition disruptions to its manufacturing, sales and marketing, development and customers before activities, the impact of the walls in Gaza and in the Ukraine, rising inflation, rising interest rate, volatile exchange rates as well as any continuing or new effects resulting from the Covid-19 pandemic and the global economic transparency, which may impact customer demand grew at their existing rate of caution and selectivity with short-term IT investments. The factors noted above are not exhausted. Further information about the company's business, including information about factors that could materially affect the looms results of operations and financial condition are discussed in our annual report on Form 20-F and other documents filed by the company and that may be subsequently filed by the company…

Thank you, Kenny. Welcome, everyone, to our financial results conference call to discuss our fourth quarter ending 2023. Revenue were $18.8 million in the quarter, and we reported a net loss of $0.5 million. Over the past few months, we have made a significant effort to conduct checks and engage in discussions with all our customers in order to assess and gain a strong handle on the situation. I believe that now we do understand the situation much better, including both the challenges and the opportunities in front of us. In our previous conference call, we have discussed 2 significant headwinds, which impacted our results during the second half of 2023 and that we are now facing as we move into 2024. The first headwind is our customer access inventory. During the global Covid shutdown in 2020 and onwards, supply chains around the world became tight with very limited availability of electronic components. As of precaution, our customers order a high level of our products from us with a significant portion being for inventory purposes and this drove above-average demand and high backlog for our product, which we enjoyed in 2021, 2022 and the first half of 2023. However, as we shared in the second half of 2023, we saw a reversal of the strength. Supply chain tightness abated and customers who build up significant inventory began drawing on their existing inventory stock while reducing significantly ongoing purchases. The second headwind we are facing are industry-related and macroeconomic factors delaying IT infrastructure investments. This is leading to a longer decision-making process on new projects and slower investment and implementation of existing infrastructure projects. As I mentioned last quarter, some of the design wins we achieved in 2022 and 2023 are ramping up significantly slower than our customers that initially anticipated…

Thank you, Liron, and good day to everyone. Revenues for the fourth quarter of 2023 were $18.8 million, down from revenues of $45.2 million as reported in the fourth quarter of last year. Our geographical revenue breakdown over the last 12 months were as follows: North America, 85%; Europe and Israel, 13%; Far East and Rest of the World, 2%. During the last 12 months, we had 1 over 10% customer, and our top 3 customers together accounted for about 38% 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, acquisition-related adjustments, impairment of intangible assets and related write-offs as well as lease liabilities, financial expenses. Before moving on, I want to highlight that due to the termination of 2 programs as part of the new 5-year strategic plan, which Liron mentioned earlier, we recorded an impairment of intangible assets and related write-offs charge to GAAP cost of sales of $9.6 million, which are not included in our non-GAAP numbers. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the fourth quarter of 2023 was $5.3 million, representing a gross margin of 28% and compared to gross profit of $15.1 million or gross margin of 33.5% in the fourth quarter of 2022. As Liron mentioned earlier, our gross margin range going forward is expected at between 27% and 32% over the years 2024 and 2025 with the gross margin gradually increasing over that period. Operating expenses in the fourth quarter of 2023 were $6.8 million compared to $7.2 million reported in the fourth quarter of 2022. Operating loss for the fourth quarter of 2023 was $1.5 million compared to operating income of $7.9 million as reported in the fourth quarter of 2022. Net loss for the quarter was $0.5 million compared to net income of $6.6 million in the fourth quarter of 2022. Loss per share in the quarter was $0.07. This is compared with diluted earnings per share of $0.98 as reported in the fourth quarter of last year. Now turning to the balance sheet. As of December 21, 2023, the company's cash equivalents and marketable securities totaled $71.5 million with no debt. This represents an increase of $4.2 million just in quarter 4, a result of a positive operational cash flow of $8.6 million, net of share repurchase cost of $4.4 million. During the quarter, Silicom repurchased approximately 250,000 shares under our current share repurchase plan. In total, Silicom has purchased an aggregate of $52 million in share buybacks in recent years. As mentioned by Liron, based on our strong balance sheet and improved cash position, we intend to continue repurchasing our shares at a full pace. That ends my summary. I would like to hand back over to the operator for questions-and-answer session. Operator?

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

So a couple of comments. Just going back to the share repurchase to start with. So what is left on the buyback? I know you said you wanted to by 1.6 million shares over the next 2 years. Is that all fully authorized, and that's what's left on the buyback now?

Currently, we are still in the third buyback plan. We still have the possibility to purchase approximately $6 million. And the plan is scheduled to end in April 2024. Moving forward, we will probably declare a new buyback plans.

So the Board will declare an additional buyback in order to get to the [indiscernible] share.

Exactly.

And in terms of the timing of these staff cuts, I think the comment was you've already reduced the staffing from 310 to240, which is I think what a 22% cut. Is that complete now? Or is there further trimming going to happen in the current quarter? And I assume that was done in the fourth quarter. Is that correct?

That's correct. We completed all the reduction we had to do, not the full impact was recorded in Q4 due to the fact that it happened in Q4, but some of that did, but we are now done with this process.

That's correct. We completed all the reduction we had to do, not the full impact was recorded in Q4 due to the fact that it happened in Q4, but some of that did, but we are now done with this process.

Yes. That's the first option.

Is there any commentary in terms of the mix of the change in OpEx between R&D sales and marketing, G&A, and any thoughts on where it’s heavier, where it's lighter?

The reductions we've made in general -- the reduction were mainly in the operations side. So we reduced about I think something like 50 employees around that number there in R&D, additional TAM and in other departments, the rest though. That gives you the picture of where we made the reductions and the impact of the different divisions.

More heavily skewed to R&D, a little less in sales and marketing and G&A. I guess that’s true.

Yeah.

In terms of these projects, you called out one where the company switched to software and hardware, but the longer-term projects, have you seen other outright cancellations that we should be calling out here?

First of all, it's not cancellation per se. It just reduced their demand, reduce their activity, but it wasn't order cancellations or something of that sort. And again, we're monitoring it. We don't have an exact similar situation where we say, “Okay, this company was acquired, and we expect it to behave the same.” But everything is possible, but I would say. But right now, we do believe we understand the situation much, much better.

And the 2 projects that were programs that were discontinued, was there revenue associated with those?

No.

And is there a cost savings associated with those cancellations beyond the headcount?

So basically, stopping those investments was mainly the headcount.

And then finally, over the short term is there an expectation that the $16 million, $17 million trajectory for the first quarter is going to stay at that level? Or will it rebound seasonally into the June quarter? Could you give us some thoughts on the slope of that recovery on a 180 to 280?

So first of all, our forecast for Q1 is 14% to 17%. And we believe it's going to be very loaded in the second half compared to the first half. We expect that the inventory situation will be a little bit better; maybe the economy will appear a little bit better there. So we definitely expect the second half to be better than the first half.

So no quantification of the delta in 40-60 and 30-70, what do you think?

Very hard to say.

[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 make your concluding statement?

Thank you, operator. Thank you, everybody, for joining the call and for 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 Fourth and final quarter 2023 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.