Silicom's Q3 2012 Results Break All Records in Terms of Revenues, Operating Income, Net Income & EPS

Silicom's Q3 2012 Results Break All Records in Terms of Revenues, Operating Income, Net Income & EPS

- Record Quarterly Results: $11.5M Revenues, $2.8M Non-GAAP Operating Income, $2.7M Non-GAAP Net Profit and $0.39 Non-GAAP EPS -

KFAR SAVA, Israel--(BUSINESS WIRE)-- 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$)