Silicom Delivers Best Quarter Ever: Reports Q3 with Record Revenues, Operating Income, Net Income & EPS

Silicom Ltd. (NASDAQ:SILC) (TASE:SILC), an industry-leading provider of high-performance server/appliances networking solutions, today reported its financial results for the third quarter and first nine months ended September 30, 2013.

Financial Results

Q3 2013:
Revenues for the third quarter increased by 49% to a record $17.2 million from $11.5 million in the third quarter of 2012.

On a GAAP basis, net income for the period totalled a record $4.0 million, or $0.55 per diluted share ($0.57 per basic share), a 56% increase compared with the $2.6 million, or $0.37 per basic and diluted share, reported in the third quarter of 2012.

On a non-GAAP basis (as described and reconciled below), net income totalled a record $4.2 million, or $0.58 per diluted share ($0.59 per basic share), a 55% increase compared with $2.7 million, or $0.39 per diluted and basic share, for the third quarter of 2012.

Q1-Q3 2013:
Revenues for the first nine months of 2013 increased by 50% to a record $47.9 million from $32.0 million in the parallel period of 2012.

On a GAAP basis, net income for the period totalled a record $10.4 million, or $1.44 per diluted share ($1.47 per basic share), up 52% compared with $6.8 million, or $0.97 per diluted share ($0.99 per basic share), in the first nine months of 2012.

On a non-GAAP basis (as described and reconciled below), net income for the period totalled a record $10.9 million, or $1.51 per diluted share ($1.54 per basic share), a 52% increase compared with $7.2 million, or $1.02 per diluted share ($1.03 per basic share), for the first nine months of 2012.

Comments of Management

Commenting on the results, Shaike Orbach, President and CEO, said, “We are extremely excited to report our strongest quarter on record, the outstanding culmination of the past four quarters’ continual success and expansion. The 50% growth that we have achieved over the past TTM (Trailing Twelve Months) demonstrates the accelerating power of all our growth engines – that is, we continue to benefit from the ramp-up of our business with so many of our existing 90+ customers; from our reputation as the ‘de facto’ performance-boosting and features-set standard for server-based appliances, which continues to bring us important new customers and verticals; and from our underlying market insight, which continues to steer our development efforts in the right directions.

“During the third quarter, we reported three significant design wins: one for SETAC modules from one of the world’s largest networking security companies, a long-time Silicom customer, that will ramp their business with us to about $4 million per year; and two from a new Traffic Management and Policy Enforcement customer, one for an Intelligent BYPASS Switch (IBS) and the other for an internal bypass blade. Our close, on-the-ground relationships with these and many other customers give us a unique understanding of market needs and an ability to foresee trends in the making, both of which continue to contribute to our growth.”

Mr. Orbach continued, “As a result, our innovative products are proving their value as performance-enhancing building blocks for some of today’s hottest IT concepts, including SDN, NFV, virtualization and cloud computing, all of which are being fuelled by the rise of Big Data. Leveraging our positioning in these fast-growing markets, we have recently acquired the Virtualization Offload Engine technology and IP developed by the exceptional Net Perform team. We believe this technology could become a key component in many ‘must-have’ solutions for virtualized data centers, and to that end we are now taking advantage of Net Perform’s development capabilities which are fully dedicated to that goal.”

Mr. Orbach concluded, “In addition, we benefit from the operating leverage of our OEM-centric business model, an advantage which is demonstrated by the impressive non-GAAP net margin of 24.4% we have achieved in Q3. In short, with an efficient business model, the industry’s strongest winds at our back and a virtually endless variety of opportunities ahead, we have never felt better positioned and look forward to generating additional growth in the years to come.”

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Conference Call Details

Silicom’s Management will host an interactive conference today, October 21^st, 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 6689141

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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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 throughput 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 Application Delivery,

WAN Optimization, Security and other mission-critical segments within the fast-growing virtualization, cloud computing and big data markets. Silicom’s product portfolio includes multi-port 1/10 Gigabit Ethernet server adapters, Intelligent Bypass solutions, Encryption accelerators and a variety of 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.

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, as well as amortization of 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.

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)

Silicom Ltd. Consolidated
Statements of Operations

(US$ thousands, except for share and per share data)

Silicom Ltd. Reconciliation of
Non-GAAP Financial Results

(US$ thousands, except for share and per share data)