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

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

 - 4 Quarters of ~50% Growth Lead to Outstanding Q3 Results: $17.2M Revenues,
         $4.2M Non-GAAP Net Income and $0.58 Non-GAAP EPS (Diluted) -

Business Wire

KFAR SAVA, Israel -- October 21, 2013

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.”

                                      ##

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.

                                      ##

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)

                                                September 30,  December 31,
                                                 2013            2012

Assets

Current assets
Cash and cash equivalents                        $12,517         $13,306
Short-term bank deposits                         -               2,527
Marketable securities                            15,584          12,583
Accounts receivables: Trade, net                 8,323           12,391
Accounts receivables: Other                      2,306           2,234
Inventories                                      31,604          14,795
Deferred tax assets                              194             47
Total current assets                             70,528          57,883
                                                                 
Marketable securities                            22,139          28,469
Assets held for employees’ severance benefits    1,509           1,377
Deferred tax assets                              338             114
Property, plant and equipment, net               1,430           1,190

Intangible assets, net                           197             -
                                                                 
Total assets                                     $96,141         $89,033
                                                                 
Liabilities and shareholders' equity
                                                                 
Current liabilities
Trade accounts payable                           $6,259          $7,875
Other accounts payable and accrued expenses      3,930           3,914
Total current liabilities                        10,189          11,789
                                                                 
Liability for employees’ severance benefits      2,562           2,278
                                                                 
Total liabilities                                12,751          14,067
                                                                 
Shareholders' equity                             
Ordinary shares and additional paid-in capital   38,011          36,086
Treasury shares                                  (38)            (38)
Retained earnings                                45,417          38,918
Total Shareholders' equity                       83,390          74,966
                                                                 
Total liabilities and shareholders' equity       $96,141         $89,033

                          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 September 30,
                                     2013       2012      2013       2012
Sales                                $17,200     $11,522   $47,945     $32,036
Cost of sales                        10,183      6,515     28,598      18,442
Gross profit                         7,017       5,007     19,347      13,594
                                                                       
Research and development expenses    1,305       1,028     3,894       3,111
Selling and marketing expenses       1,004       799       2,717       2,079
General and administrative           636         502       1,863       1,564
expenses
Total operating expenses             2,945       2,329     8,474       6,754
                                                                       
Operating income                     4,072       2,678     10,873      6,840
                                                                       
Financial income, net                100         172       280         624
Income before income taxes           4,172       2,850     11,153      7,464
Income taxes                         152         269       741         624
Net income                           $4,020      $2,581    $10,412     $6,840
                                                                       
                                                                       
Basic income per ordinary share      $0.57       $0.37     $1.47       $0.99
(US$)
                                                                       
Weighted average number of
ordinary                                                            
shares used to compute basic
income                               7,115       6,931     7,098       6,929
per share (in thousands)
                                                                       
Diluted income per ordinary share    $0.55       $0.37     $1.44       $0.97
(US$)
                                                                       
Weighted average number of
ordinary                                                            
shares used to compute diluted
income                               7,276       7,020     7,238       7,021
per share (in thousands)

                        Silicom Ltd. Reconciliation of
                          Non-GAAP Financial Results

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

                                Three-month period      Nine-month period
                                 ended September 30,      ended September 30,
                                 2013         2012       2013       2012
GAAP gross profit                $7,017        $5,007     $19,347     $13,594
(1) Share-based compensation     26            9          77          17
(*)
Non-GAAP gross profit            $7,043        $5,016     $19,424     $13,611
                                                                      
GAAP operating income            $4,072        $2,678     $10,873     $6,840
(1) Share-based compensation
(*)                              170           124        502         320

(2) Amortization of              3             -          3           -
intangible assets
Non-GAAP operating income        $4,245        $2,802     $11,378     $7,160
                                                                      
GAAP net income                  $4,020        $2,581     $10,412     $6,840
(1) Share-based compensation
(*)                              170           124        502         320

(2) Amortization of              3             -          3           -
intangible assets
Non-GAAP net income              $4,193        $2,705     $10,917     $7,160
                                                                      
                                                                  

GAAP basic income per            $0.57         $0.37      $1.47       $0.99
ordinary share (US$)
(1) Share-based compensation
(*)                              0.02          0.02       0.07        0.04

(2) Amortization of              -             -          -           -
intangible assets
                                                                      
Non-GAAP basic income per        $0.59         $0.39      $1.54       $1.03
ordinary share (US$)
                                                                      
GAAP diluted income per                                            
ordinary share (US$)
                                 $0.55         $0.37      $1.44       $0.97
(1) Share-based compensation
(*)                              0.03          0.02       0.07        0.05

(2) Amortization of              -             -          -           -
intangible assets
                                                                      
Non-GAAP diluted income per      $0.58         $0.39      $1.51       $1.02
ordinary share (US$)
                                                                      
(*) Adjustments related to share-based compensation expenses according to ASC
topic 718 (SFAS 123 (R))

Contact:

Company Contact:
Eran Gilad, CFO
Silicom Ltd.
Tel: +972-9-764-4555
E-mail:
erang@silicom.co.il
or
Investor relations contact:
Kenny Green / Ehud Helft
CCG Israel Investor Relations
Tel: +1 646 201 9246
E-mail : silicom@ccgisrael.com
 
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