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Cyber Security and Storage Networking Infrastructure Hardware Partner of Choice March 21, 2018 Safe Harbor Guidelines & Legal Notes The information presented today contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. 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 necessarily involve known and unknown risks and uncertainties, which include, but are not limited to, Silicom’s increasing dependence for substantial revenue growth on a limited number of customers in the evolving cloud-based market, the speed and extent to which cloud-based and cloud-focused solutions are adopted by the market, likelihood that Silicom will rely increasingly on customers which provide cloud-based and cloud-focused solutions in this evolving market, resulting in an increasing dependence on a smaller number of larger customers, difficulty in commercializing and marketing of Silicom’s products and services, maintaining and protecting brand recognition, protection of intellectual property, competition and other factors which Silicom discusses in its public filings. Therefore, there can be no assurance that actual future results will not differ significantly from anticipated results. Therefore, you are cautioned not to rely on these forward-looking statements. Silicom does not undertake to update any forward-looking statements as a result of new information or future events or developments except as may be required by law. Financial information as of 2010, as presented herein, may be considered "non- GAAP financial measures" under Regulation G and related reporting requirements promulgated by the Securities and Exchange Commission ("SEC") as they apply to Silicom. Please note that any financial information presented for the period prior to 2010 is in accordance with GAAP. Please refer to Silicom’s disclosure documents filed or furnished with the SEC, including Silicom’s Annual Reports on Form 20-F and/or Quarterly Reports on Form 6-K, for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Silicom provides such non-GAAP data to investors as supplemental data and not in substitution or replacement for GAAP measures, because Silicom's management believes such data provides useful information to investors. 2 Silicom (SILC) at a Glance . Industry-leading provider of high-performance networking & data infrastructure solutions for Cloud, Telcos and Data Centers Critical performance and efficiency needs of our customers are aligned with our technical/solution capabilities . Exceptional track record of revenue growth and profitability Last 8 years: Revenues - 25% CAGR; Operating profit - 36% CAGR . Improved Visibility & long-term growth . Large, strong base of customers with multi-year Design Wins . 91% Repeat revenues . Robust industry environment We are poised to benefit from the growth of multiple “hot” end markets: Cloud, SD-WAN, NFV, Data Centers, Web 2.0, Cyber Security and Storage 3 Key Business Achievements Revenues- 25% CAGR X6 in 8 years 25% Growth Operating Profit- 36% CAGR X11 in 8 years 125.7 (in $M) 100.3 82.7 73.3 75.6 48.7 39.6 (20%) 30.4 25.1 20.5 18.3 18.7 19.2 19.4 (11%) 8.9 10.7 2.2 6.1 EPS: $0.41 $0.82 $1.24 $1.52 $2.45 $2.22 $2.35 $2.24 $2.85 4 Business Overview Smart Server Depth Multiple Technologies Adapters Adapters DIFFERENTIATION PRODUCTS Customer Intel VCPEs Centric Cyber App. Edge Security Delivery Cyber Network Appliances SILICOM Security Monitoring Network SD-WAN High FPGAs Appliances NFV Speed MARKET SEGMENTS IP & TECHNOLOGY Next Cloud Compute Generation 5 Industry-Leading Products Comprehensive set of high-performance data infrastructure and networking solutions for Cloud, Telecom, Service providers, Web 2.0, Cyber Security, Data Centers, Networking and Storage platforms Our solutions: Flexible product formats: - Boost performance - Add-On - Provide additional functionality - Standalone - Full platforms Silicom’s product portfolio is diversified across products & markets, with over 300 different SKUs 6 Broad range of innovative solutions Data center Switches Bypass Server Adapters Cloud Switch on a NIC Time Stamp & Virtualized Network Capture Edge/CPE Appliances Smart NICs & FPGA SETAC Encryption Ultra-Low Latency Networking and Data infrastructure vendors desire to outsource their hardware from an expert with a complete portfolio of mission-critical products to focus on their unique software 7 Diverse Markets APAC Government 4% Service Provider /Cloud 11% EMEA 41% 16% Broad Global Customer Markets Demand Others Enterprise 4% 44% North America 80% % of Last Twelve Months Revenues Based on proprietary Company data and analysis 8 Diverse Markets Others 5% Storage 8% Cyber Security 27% Network Monitoring / Traffic Management 7% Attractive Market Segments WAN Opt. / SD-WAN 6% Platforms / Application Infrastructure Delivery 35% 12% % of Last Twelve Months Revenues Based on proprietary Company data and analysis 9 Global Customers More than 400 Active Design Wins with over 150 customers, including many market leaders Cloud Cyber Security SD-WAN / NFV Service Providers Web 2.0 Data Centers Storage Exploding data and Internet traffic dramatically increase the need for connectivity and bandwidth - and the need for higher performance solutions 10 The Silicom Edge - Enabling Our Customer’s Success Hand in hand with our clients from concept through design to implementation Strong track record of providing superior, purpose-built building blocks that meet fundamental customer needs at COTS time-to-market and cost . Products that combine technologies – Networking, Encryption, FPGA, Embedded CPU . FW and SW packages . Custom driver support and specific application use case development . Full APIs (Application Programming Interfaces) for added functionality and performance . FPGA IP cores for Capture, Packet recording, TOE offload, Filtering, DPI and HFT . FPGA overlay packages for customer code integration (BYOC) Unique, engineering-driven customer relationships . Customer integration support and POC hand holding 11 Customers as Partners DESIGN WINS TRUSTED PARTNERSHIPS Initial Effort Production Ongoing Partnership Long sales cycle 2-4 years secured Additional product (6-18 months) revenue streams qualifications . We offer outstanding . Trusted relationships lead to sharing of road pre-sale engineer-to- maps & joint development of new products engineer technical . Over time, we design additional Silicom consulting products into more of our customers’ systems, increasing sales per system and sales per customer Seed and Grow - Start small and scale out 12 Growth Strategy Expanding Customer Base Substantial Repeat Revenues 160 100% Number of Customers New customers 140 95% 120 90% 100 80 85% Existing customers 60 80% 40 75% 20 0 70% 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 % of revenues from new customers acquired in each year versus existing customers 13 Supplier as Partner Silicom & Intel “Higher-performance encryption and compression offloads are two of the significant challenges that high-performance servers must overcome to achieve target performance levels, especially Innovative product CPUs, Ethernet in the SDN and Cloud space. Silicom is addressing this pain point design, Reference controllers, encryption, with a comprehensive suite of cards that integrate encryption Designs & application- compression, DPDK, and compression functionality.” related solutions Quick Assist “This is an important offering that we believe will answer the needs of performance-hungry servers in both the SDN and Cloud markets, as well as in the traditional networking appliances markets…” Frank Schapfel, Director of Marketing, Intel Communications & Server “Intel Plus” Infrastructure Division Product Family “We are delighted to have ADI Silicom enhances and complements Intel’s Engineering’s support on our next- latest Red Rock Canyon / FM10K architecture generation communications and offers Network Preprocessing, Load infrastructure platform. ADI Engineering Balancing and other solutions featuring an helps Intel customers launch innovative embedded fully capable network switch. Intel new products that use the full potential introduces Silicom to various customers of the new platform.” active in the Cloud, Data Centers, Service Steve Price, general manager, Intel Providers and Enterprise markets requiring Communication Infrastructure FM10K related solutions. 14 IT Market Trends Become Our Growth Drivers . SD-WAN and NFV – Virtualized/Universal CPE Edge equipment . Next Gen Cloud – Fast innovative acceleration solutions for cloud infrastructures . Cyber Security – line-speed capture, encryption and FPGA-based acceleration . Ethernet – from Networking to Storage and Telecom . Evolution to higher speeds (from 10G to 100G) – tasks moving from SW to HW (e.g. encryption, time stamping) . SDN – the use of standard platforms increases the need for add-on products . Complex networks – Higher demand for Monitoring, Capture and Line-rate processing The revenue potential per Design Win with major Cloud, Telco, Data Center and Service Provider customers in the pipeline today is higher by an order of magnitude than our Design Wins of the past 15 FPGA Momentum Builds . FPGA is the main technology
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