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Silicom Reports Financial Results for the 2nd Quarter & 1st Half of 2016
[July 25, 2016]

Silicom Reports Financial Results for the 2nd Quarter & 1st Half of 2016


Silicom Ltd. (News - Alert) (NASDAQ:SILC), a leading provider of high-performance networking and data infrastructure solutions, today reported its financial results for the second quarter and six months ended June 30, 2016.

Financial Results

Second Quarter: Revenues for the second quarter of 2016 totalled $26.0 million, up 52% on a year-over-year basis compared with $17.1 million in the second quarter of 2015, and up 22% compared sequentially with the first quarter of 2016.

On a GAAP basis, net income for the quarter totalled $3.5 million, or $0.48 per share (basic and diluted), a 72% increase compared with $2.1 million, $0.28 per share (basic and diluted), in the second quarter of 2015, and an 85% increase compared with the first quarter of 2016. On a non-GAAP basis (as described and reconciled below), net income totalled $4.7 million, or $0.63 per diluted share ($0.64 per basic share), up 59% compared with $2.9 million, or $0.40 per diluted share ($0.41 per basic share), for the second quarter of 2015, and 54% compared with the first quarter of 2016.

First Six Months: Revenues for the first half of 2016 totalled $47.4 million, a 32% increase compared with $35.9 million in the first half of 2015.

On a GAAP basis, net income for the period totalled $5.4 million, or $0.73 per diluted share ($0.74 per basic share), an 8% increase compared with $5.0 million, or $0.68 per diluted share ($0.69 per basic share), in the first half of 2015. On a non-GAAP basis (as described and reconciled below), net income for the period totalled $7.7 million, or $1.04 per diluted share ($1.05 per basic share), a 14% increase compared with $6.8 million, or $0.92 per diluted share ($0.94 per basic share), in the first six months of 2015.

Comments of Management

Mr. Shaike Orbach, Silicom's President and CEO, commented, "We are proud to report another great quarter, with strong revenues and multiple Design Wins demonstrating our accelerating momentum in many of our target markets: especially Cyber Security, Network Monitoring, Cloud, SDN and SD-WAN. These target markets have a critical need for robust throughput solutions, and our concepts are proving to be an exact fit. For example, during the quarter we secured a first Design Win from an emerging Cyber Security player and closed a Time Stamping/Packet Processing Design Win with a Tier-1 Network Monitoring company, while also achieving significant initial sales for our new Switched SETAC Cloud Platform. And after the quarter, we announced our first major win in the SD-WAN space."

Mr. Orbach continued, "With a solid pipeline from our existing customers and stronger-than-ever sales activities with existing and emerging players in fast-growth markets, we feel comfortable projecting that 2016 will be a strong growth year for Silicom. We are fully focused on leveraging our excellent positioning and the momentum of our target markets to generate growth and create value in 2016 and beyond."

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Conference Call Details
Silicom's Management will host an interactive conference today, July 25th, 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 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 and RSUs granted to directors, officers and employees, acquisition-related expenses, adjustment of inventory step up related to acquisition, amortization of acquired intangible assets, changes in the fair value of contingent consideration from a business combination, as well as taxes on amortization of acquired intangible assets. 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 and data infrastructure solutions. Designed primarily to increase data center efficiency, Silicom's solutions dramatically improve the performance and availability of networking appliances and other server-based systems.

Silicom's products are used by a large and growing base of OEM customers, many of whom are market leaders, as performance-boosting solutions for their offerings in the Cyber Security, Network Monitoring and Analytics, Traffic Management, Application Delivery, WAN Optimization, High Frequency Trading and other mission-critical segments within the fast-growing data center, enterprise networking, virtualization, cloud computing and big data markets. Silicom's product portfolio includes multi-port 1/10/25/40/100 Gigabit Ethernet server adapters, Intelligent Bypass solutions, Encryption accelerators, Ultra Low Latency solutions, Time Stamping and other innovative Smart adapters. These products are available for incorporation directly into our OEM customers' systems, or provided as part of Silicom's patented SETAC (Server To Appliance Converter), a unique approach to the provision of high quality standard platforms with modular front connectivity.

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)
 
June 30, December 31,
2016 2015
 
Assets
 
Current assets
Cash and cash equivalents $ 10,969 $ 18,178
Marketable securities 15,517 8,636
Accounts receivables: Trade, net 21,378 23,768
Accounts receivables: Other 4,411 1,380
Inventories 38,367 26,321
Deferred tax assets   -   950
Total current assets 90,642 79,233
 
Marketable securities 13,629 24,246
Assets held for employees' severance benefits 1,407 1,374
Deferred tax assets 1,721 595
Property, plant and equipment, net 3,972 3,825
Intangible assets, net 4,331 5,164
Goodwill   25,741   25,561
 
Total assets $ 141,443 $ 139,998
 
Liabilities and shareholders' equity
 
Current liabilities
Trade accounts payable $ 14,996 $ 8,556
Other accounts payable and accrued expenses 6,040 11,147
Deferred tax liabilities   -   111
 
Total current liabilities 21,036 19,814
 
Contingent consideration 4,991 4,942
Liability for employees' severance benefits 2,504 2,251
Deferred tax liabilities   438   157
 
Total liabilities   28,969   27,164
 
Shareholders' equity
Ordinary shares and additional paid-in capital 45,633 44,122
Treasury shares (38) (38)
Retained earnings   66,879   68,750
Total shareholders' equity   112,474   112,834
 
Total liabilities and shareholders' equity $ 141,443 $ 139,998
 
 
Silicom Ltd. Consolidated Statements of Operations
     
(US$ thousands, except for share and per share data)
 
Three-month period Six-month period
ended June 30, ended June 30,
2016 2015 2016 2015
Sales $ 26,001 $ 17,121 $ 47,358 $ 35,884
Cost of sales   16,150   10,075   29,575   20,967
Gross profit   9,851   7,046   17,783   14,917
 
Research and development expenses 2,869 2,283 5,897 4,581
Selling and marketing expenses 1,648 1,396 3,175 2,689
General and administrative expenses   1,048   956   2,016   1,909
Total operating expenses   5,565   4,635   11,088   9,179
 
Operating income 4,286 2,411 6,695 5,738
 
Financial income (expenses), net   90   4   25   113
Income before income taxes 4,376 2,415 6,720 5,851
Income taxes   843   360   1,279   810
Net income $ 3,533 $ 2,055 $ 5,441 $ 5,041
 
 
 
Basic income per ordinary share (US$) $ 0.48 $ 0.28 $ 0.74 $ 0.69
 
Weighted average number of ordinary shares used to compute basic income per share (in thousands)   7,335   7,274   7,316   7,260
 
 
Diluted income per ordinary share (US$) $ 0.48 $ 0.28 $ 0.73 $ 0.68
 
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)   7,414   7,378   7,404   7,372
 
 
Silicom Ltd. Reconciliation of Non-GAAP Financial Results
   
(US$ thousands, except for share and per share data)
 
Three-month period Six-month period
ended June 30, ended June 30,
2016 2015 2016 2015
 
GAAP gross profit $ 9,851 $ 7,046 $ 17,783 $ 14,917
(1) Share-based compensation (*) 39 27 77 53
(2) Adjustment of inventory step up related to acquisition - 173 - 268
(4)Amortization of acquired intangible assets   -   -   274   -
Non-GAAP gross profit $ 9,890 $ 7,246 $ 18,134 $ 15,238
 
GAAP operating income $ 4,286 $ 2,411 $ 6,695 $ 5,738
Gross profit adjustments 39 200 351 321
(1) Share-based compensation (*) 381 343 787 681
(3) Acquisition-related expenses - 42 - 130
(4) Amortization of acquired intangible assets 495 180 987 361
(5) Changes in the fair value of contingent consideration   62   207   15   404
Non-GAAP operating income $ 5,263 $ 3,383 $ 8,835 $ 7,635
 
GAAP net income $ 3,533 $ 2,055 $ 5,441 $ 5,041
Operating income adjustments 977 972 2,140 1,897
(6) Taxes on amortization of acquired intangible assets   174   (79)   135   (141)
Non-GAAP net income $ 4,684 $ 2,948 $ 7,716 $ 6,797
 
GAAP net income $ 3,533 $ 2,055 $ 5,441 $ 5,041
Adjustments for Non-GAAP cost of sales 39 200 351 321
Adjustments for Non-GAAP Research and development expenses 492 272 960 571
Adjustments for Non-GAAP Selling and marketing expenses 258 165 537 328
Adjustments for Non-GAAP General and administrative expenses 188 335 292 677
Adjustments for Non-GAAP Income taxes   174   (79)   135   (141)
Non-GAAP net income $ 4,684 $ 2,948 $ 7,716 $ 6,797
 
GAAP basic income per ordinary share (US$) $ 0.48 $ 0.28 $ 0.74 $ 0.69
(1) Share-based compensation (*) 0.06 0.05 0.12 0.10
(2-6) Acquisition-related adjustments   0.10   0.08   0.19   0.15
Non-GAAP basic income per ordinary share (US$) $ 0.64 $ 0.41 $ 1.05 $ 0.94
 
GAAP diluted income per ordinary share (US$) $ 0.48 $ 0.28 $ 0.73 $ 0.68
(1) Share-based compensation (*) 0.06 0.05 0.12 0.10
(2-6) Acquisition-related adjustments   0.09   0.07   0.19   0.14
Non-GAAP diluted income per ordinary share (US$) $ 0.63 $ 0.40 $ 1.04 $ 0.92
 
(*) Adjustments related to share-based compensation expenses according to ASC (News - Alert) topic 718 (SFAS 123 (R))


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