Silicom’s Q3 2012 Results Break All Records In Terms Of Revenues, Operating Income, Net Income & EPS

Silicom Ltd. (NASDAQ:SILC) (TASE:SILC), an industry-leading provider of high-performance server/appliance networking solutions, today reported record financial results for the third quarter and first nine months ended September 30, 2012.

Financial Results

Financial results for Q3 2012: For the third quarter of 2012, Silicom’s financial results broke all previous records in terms of revenues, operating income, net income and earnings per share (EPS), demonstrating the continuing strong sales momentum of all its product lines.

Revenues for the quarter reached $11.5 million, a 15% increase compared with $10.0 million in the third quarter of 2011. On a GAAP basis, reported net income for the quarter totalled $2.6 million, or $0.37 per diluted and basic share, up 23% from the $2.1 million, or $0.30 per diluted share ($0.31 per basic share), recorded in the third quarter of 2011.

On a non-GAAP basis (excluding non-cash share-based compensation, as described and reconciled below), net income for the period totalled $2.7 million, or $0.39 per diluted and basic share. This is up 22% from $2.2 million, or $0.32 per diluted and basic share, in the third quarter of 2011.

Financial results for the first nine months of 2012: Silicom’s revenues for the first nine months of 2012 increased by 12% to a record $32.0 million from $28.6 million in the first nine months of 2011.

On a GAAP basis, reported net income for the period totalled $6.8 million, or $0.97 per diluted share ($0.99 per basic share), up 17% from $5.8 million, or $0.83 per diluted share ($0.85 per basic share) in the first nine months of 2011.

On a non-GAAP basis (excluding non-cash share-based compensation, as described and reconciled below), net income for the period totalled $7.2 million, or $1.02 per diluted share ($1.03 per basic share). This is up 16% from $6.2 million, or $0.88 per diluted share ($0.90 per basic share).

Cash Position: As of September 30, 2012, the Company’s cash, cash equivalents, bank deposits and marketable securities totalled $54.8 million, or $7.91 per outstanding share, up $2.0 million compared with the end of the second quarter, and up $5.6 million compared with the end of 2011.

Comments of Management

Commenting on the results, Shaike Orbach, President and CEO, said, “We are very pleased to report another quarter of record results as measured across all parameters, demonstrating the strong momentum of our sales and the leverage inherent in our business model.

“We continue to benefit from some of the IT industry strongest trends – especially the performance and security challenges that are accompanying the rise of Big Data and cloud computing. With a reputation for out-of-the-box technologies, rapid response time and world-class service, we are being sought out by the market’s top server and appliance manufacturers, and they are bringing us a steady stream of new opportunities, Design Wins and ongoing orders. As our customer base continues to grow and diversify, our pool of Design Wins expands, bringing us a growing platform of recurring orders as well as a broader range of new opportunities, often from different divisions within a large corporation. In parallel, our success in remaining a lean organization with an emphasis on brain-power has enabled us to continually increase our profitability as we scale our sales.”

Mr. Orbach concluded, “As such, we feel more confident than ever about our ability to continue to grow and flourish over the short and long term. With unique technologies and products, a top-tier customer base and a second-to-none team, we feel ideally positioned to continue growing in step with our fast-growth target markets.”

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Conference Call Details

The Company will host a conference call today at 9:00am Eastern Time to review and discuss the results and to answer investors’ questions.

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, 3:00pm 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 of Silicom’s website.

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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 patented 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

(US$ thousands)
 

September 30,

2012
 

December 31, 2011

Assets
 
Current assets
Cash and cash equivalents $9,568 $11,483
Short-term bank deposits 5,046 5,010
Marketable securities 11,587 9,027
Accounts receivables: Trade, net 9,477 8,613
Accounts receivables: Other 1,460 1,597
Inventories 13,440 11,173
Deferred tax assets 44 48
Total current assets 50,622 46,951
 
Marketable securities 28,623 23,667
Assets held for employees’ severance benefits

1,306

1,275
Deferred tax assets 109 135
Property, plant and equipment, net 1,110 837
 
Total assets $81,770 $72,865
 

Liabilities and shareholders' equity
 

Current liabilities

Trade accounts payable

$5,318

$3,978

Other accounts payable and accrued expenses

2,831

2,460

Total current liabilities

8,149

6,438
 

Liability for employees’ severance benefits

2,165

2,153
 

Total liabilities

10,314

8,591
 

Shareholders' equity

Ordinary shares and additional paid-in capital

35,607

35,265

Treasury shares

(38)

(38)

Retained earnings

35,887

29,047

Total Shareholders' equity

71,456

64,274
 

Total liabilities and shareholders' equity

$81,770

$72,865

Silicom Ltd. Consolidated Statements of Operations

(US$ thousands, except for share and per share data)
  Three-month period   Nine-month period
ended September 30, ended June 30,
2012   2011 2012   2011
Sales $11,522 $10,019 $32,036 $28,553
Cost of sales 6,515 5,649 18,442 16,061
Gross profit 5,007 4,370 13,594 12,492
 
Research and development expenses 1,028 1,036 3,111 3,094
Selling and marketing expenses 799 619 2,079 1,949
General and administrative expenses 502 473 1,564 1,447
Total operating expenses 2,329 2,128 6,754 6,490
 
Operating income 2,678 2,242 6,840 6,002
 
Financial income, net 172 19 624 352
Income before income taxes 2,850 2,261 7,464 6,354
Income taxes 269 157 624 511
Net income $2,581 $2,104 $6,840 $5,843
 
 

Basic income per ordinary share (US$)

$0.37

$0.31

$0.99

$0.85
 
Weighted average number of ordinary shares used to compute basic income per share (in thousands)

 

6,931

 

6,892

 

6,929

 

6,889
 

Diluted income per ordinary share (US$)

$0.37

$0.30

$0.97

$0.83
 
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)

 

7,020

 

7,012

 

7,021

 

7,013

Silicom Ltd. Reconciliation of Non-GAAP Financial Results

(US$ thousands, except for share and per share data)
  Three-month period
ended September 30,
    2012       2011
GAAP

(as reported)
Adjustments (*) Non-GAAP Non-GAAP
Sales $11,522 $11,522 $10,019
Cost of sales 6,515 9 6,506 5,643
Gross profit 5,007   5,016 4,376
 
Research and development expenses 1,028 28 1,000 1,012
Selling and marketing expenses 799 34 765 585
General and administrative expenses 502 53 449 427
Total operating expenses 2,329   2,214 2,024
 
Operating income 2,678 2,802 2,352
 
Financial income, net 172   172 19
Income before income taxes 2,850 2,974 2,371
Income taxes 269   269 157
Net income $2,581   $2,705 $2,214
 
 

Basic income per ordinary share (US$)

$0.37

 

$0.39

$0.32
 
Weighted average number of ordinary shares used to compute basic income per share (in thousands)

 

6,931
 

 

6,931

 

6,892
 

Diluted income per ordinary share (US$)

$0.37

 

$0.39

$0.32
 
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)

 

7,020
 

 

7,020

 

7,012
 

Total Adjustments
124
 
(*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

Silicom Ltd. Reconciliation of Non-GAAP Financial Results

(US$ thousands, except for share and per share data)
  Nine-month period
ended September 30,
    2012       2011
GAAP

(as reported)
Adjustments (*) Non-GAAP Non-GAAP
Sales $32,036 $32,036 $28,553
Cost of sales 18,442 17 18,425 16,042
Gross profit 13,594   13,611 12,511
 
Research and development expenses 3,111 70 3,041 3,020
Selling and marketing expenses 2,079 94 1,985 1,846
General and administrative expenses 1,564 139 1,425 1,308
Total operating expenses 6,754   6,451 6,174
 
Operating income 6,840 7,160 6,337
 
Financial income, net 624   624 352
Income before income taxes 7,464 7,784 6,689
Income taxes 624   624 511
Net income $6,840   $7,160 $6,178
 
 

Basic income per ordinary share (US$)

$0.99
 

$1.03

$0.90
 
Weighted average number of ordinary shares used to compute basic income per share (in thousands)

 

6,929
 

 

6,929

 

6,889
 

Diluted income per ordinary share (US$)

$0.97
 

$1.02

$0.88
 
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)

 

7,021
 

 

7,021

 

7,013
 

Total Adjustments
320
 
(*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

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