Silicom Enters 2011 With Very Strong Q1: Sales Up 43% YOY, Net Income Up 87%

Silicom Ltd. (NASDAQ:SILC)(TASE:SILC), an industry-leading provider of high-performance server/appliances networking solutions, today reported its financial results for the first quarter ended March 31, 2011.

Silicom’s Q1 revenues increased by 43% to $9.2 million from $6.4 million in the first quarter of 2010. The sales growth reflects new wins with major customers, continued strong sales of all products and rising demand in all target markets.

On a GAAP basis, reported net income totalled $1.8 million, or $0.25 per diluted share ($0.26 per basic share), up 88% from $0.9 million, or $0.13 per diluted share ($0.14 per basic share), in the first quarter of 2010.

On a non-GAAP basis, which excludes non-cash share-based compensation, as described and reconciled below, net income totalled $1.9 million, or $0.27 per diluted and basic share. This is up 87% compared with $1.0 million, or $0.14 per diluted share ($0.15 per basic share), in the first quarter of 2010.

As of March 31, 2011, the Company’s cash, cash equivalents, bank deposits and marketable securities totalled $46.9 million, or $6.81 per outstanding share, up $1.1 million from the $45.8 million recorded at the end of 2010.

Commenting on the results, Shaike Orbach, President and CEO, said, “The first quarter of 2011 was a great beginning to what we believe will be another strong year for Silicom. Our revenues continue to rise at a faster pace than our markets, demonstrating that we are gaining market share and creating new market niches. We are also proud to report an increase of 87% in our net income, an accomplishment which confirms the exceptional profit-generating potential of our business model.

“Throughout the quarter, we continued to generate strong sales of all our products to all major customers in all target markets. We were particularly excited by two milestone events which together demonstrate the essence of our strategy: pursuing aggressive growth in our traditional businesses while actualizing the dramatic potential of our SETAC business.
  • We secured two major Design Wins from existing major customers: an additional business unit of a Fortune-100 networking customer, and a leading Application Delivery customer. After they have reached their production run rate, these Design Wins will generate a total of $4 million per year. These wins are in addition to the new customers that we continue adding to our portfolio every quarter, each of which offers the potential for significant ongoing orders over time.
  • A Tier 1 server manufacturer has begun offering an appliance that combines our SETAC Server To Appliance Converter with one of its popular standard servers, thereby moving SETAC further into the industry spotlight. This is in line with our strategy for building SETAC into one of our most powerful growth engines.”

Mr. Orbach concluded, “Our growth demonstrates the importance of a sound, continuously growing platform of loyal customers who buy from us repeatedly, together with industry-leading technologies and a continuous flow of new families of products. Our reputation for innovation in high-growth areas such as 10Gbps, Re-Direction, Encryption, External bypass - and obviously SETAC – are leading both existing and new customers to select our solutions. With favorable markets, increasing success with top-tier customers and a fertile flow of innovative concepts, we believe that Silicom is on track for continued strong growth during 2011 and beyond.”

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Conference Call Details

Silicom’s Management will host an interactive conference today, April 21st, at 9am Eastern Time (6am Pacific Time, 4pm Israel Time) to review and discuss the results.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, try the international dial-in number.

US: 1 888 668 9141

UK: 0 800 917 5108

ISRAEL: 03 918 0609

INTERNATIONAL: +972 3 918 0609

At: 9:00am Eastern Time, 6:00am Pacific Time, 4:00pm Israel Time

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call under the investor relations section.

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Non-GAAP Financial Measures

This release, including the financial tables below, presents other financial information that may be considered "non-GAAP financial measures" under Regulation G and related reporting requirements promulgated by the Securities and Exchange Commission as they apply to our company. These non-GAAP financial measures exclude compensation expenses in respect of options granted to directors, officers and employees. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures. The tables also present the GAAP financial measures, which are most comparable to the non-GAAP financial measures as well as reconciliation between the non-GAAP financial measures and the most comparable GAAP financial measures. The non-GAAP financial information presented herein should not be considered in isolation from or as a substitute for operating income, net income or per share data prepared in accordance with GAAP.

About Silicom

Silicom Ltd. is an industry-leading provider of high-performance networking solutions designed to increase the throughput and availability of networking appliances and server-based systems.

Silicom’s large and growing base of OEM customers includes most of the market-leading players in the areas of WAN Optimization, Security and other mission-critical gateway applications. Silicom’s products include a variety of multi-port 1/10 Gigabit Ethernet server adapters, innovative internal and external BYPASS solutions and advanced Smart adapters, including SSL encryption solutions and Redirector adapters.

In addition, Silicom's patent-pending new SETAC (Server To Appliance Converter) product family is a unique solution that enables standard servers to be configured as network appliances with high-density front networking ports and no-hassle port modularity.

For more information, please visit: www.silicom.co.il.

Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties, or other factors not under the Company's control, which may cause actual results, performance, or achievements of the Company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the Company's periodic filings with the Securities and Exchange Commission. The Company disclaims any duty to update such statements.

-- FINANCIAL TABLES FOLLOW --

Silicom Ltd. Consolidated Balance Sheets
 

March 31, 2011
 

December 31, 2010

Assets
 
Current assets
Cash and cash equivalents $6,895 $6,657
Short-term bank deposits 9,267 9,209
Marketable securities 9,282 8,162
Accounts receivables: Trade, net 6,578 6,762
Accounts receivables: Other 985 555
Inventories 9,662 8,140
Deferred tax assets 56 50
Total current assets 42,725 39,535
 
Marketable securities 21,503 21,773
Assets held for employees’ severance benefits

1,350

1,302
Deferred tax assets 150 219
Property, plant and equipment, net 675 650
 
Total assets $66,403 $63,479
 

Liabilities and shareholders' equity
 
Current liabilities
Trade accounts payable $4,966 $3,753
Other accounts payable and accrued expenses

1,757

2,074
Total current liabilities 6,723 5,827
 
Liability for employees’ severance benefits

2,336

2,222
 
Total liabilities 9,059 8,049
 
Shareholders' equity
Ordinary shares and additional paid-in capital

34,813

34,664
Treasury shares (38) (38)
Retained earnings 22,569 20,804
Total Shareholders' equity 57,344 55,430
Total liabilities and shareholders' equity

$66,403

$63,479

Silicom Ltd. Consolidated

Statements of Operations

(US$ thousands, except for share and per share data)
  Three-month period ended March 31,
2011   2010
Sales $9,177 $6,400
Cost of sales 5,197 3,698
Gross profit 3,980 2,702
 
Research and development expenses 1,038 837
Selling and marketing expenses 661 498
General and administrative expenses 512 360
Total operating expenses 2,211 1,695
 
Operating income 1,769 1,007
 
Financial income, net 182 141
Income before income taxes 1,951 1,148
Income taxes 186 210
Net income $1,765 $938
 
 

Basic income per ordinary share (US$)

$0.26

$0.14
 

Weighted average number of ordinaryshares used to compute basic income pershare (in thousands)

 

6,886

 

6,809
 

Diluted income per ordinary share (US$)

$0.25

$0.13
 

Weighted average number of ordinaryshares used to compute diluted income pershare (in thousands)

 

7,013

 

6,964

Silicom Ltd. Reconciliation of

Non-GAAP Financial Results

(US$ thousands, except for share and per share data)
  Three-month period ended March 31,
2011     2010
GAAP

(as reported)
  Adjustments (*)   Non-GAAP Non-GAAP
Sales $9,177 $9,177 $6,400
Cost of sales 5,197 7 5,190 3,688
Gross profit 3,980   3,987 2,712
 
Research and development expenses 1,038 26 1,012 815
Selling and marketing expenses 661 36 625 478
General and administrative expenses 512 48 464 343
Total operating expenses 2,211   2,101 1,636
 
Operating income 1,769 1,886 1,076
 
Financial income, net 182   182 141
Income before income taxes 1,951 2,068 1,217
Income taxes 186   186 210
Net income $1,765   $1,882 $1,007
 
 

Basic income per ordinary share (US$)

$0.26

 

$0.27

$0.15
 

Weighted average number of ordinaryshares used to compute basic income pershare (in thousands)

 

6,886
 

 

6,886

 

6,809
 

Diluted income per ordinary share (US$)

$0.25

 

$0.27

$0.14
 

Weighted average number of ordinaryshares used to compute diluted income pershare (in thousands)

 

7,013
 

 

7,013

 

6,964
 

Total Adjustments
117
 

(*) Adjustments related to share-basedcompensation expenses according to ASCtopic 718 (SFAS 123 (R))

Copyright Business Wire 2010

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