Silicom Q2 Revenues up 14% to $17.9M; Operating Profit up 17% to $4.3M

  Silicom Q2 Revenues up 14% to $17.9M; Operating Profit up 17% to $4.3M

Business Wire

KFAR SAVA, Israel -- July 22, 2014

Silicom Ltd. (NASDAQ:SILC) (TASE:SILC), an industry-leading provider of
high-performance server/appliances networking solutions, today reported its
financial results for the second quarter and first half ended June 30, 2014.

Financial Results

Q2 2014: Revenues for the second quarter increased by 14% to $17.9 million
from $15.7 million in the second quarter of 2013.

On a GAAP basis, operating income for the quarter increased by 12% to $3.9
million compared with $3.5 million in the second quarter of 2013. Net income
for the quarter totalled $3.3 million, or $0.45 per diluted share ($0.46 per
basic share), compared with $3.3 million, or $0.45 per diluted share ($0.46
per basic share), in the second quarter of 2013.

On a non-GAAP basis (as described and reconciled below), operating income for
the quarter increased by 17% to $4.3 million compared with $3.6 million in the
second quarter of 2013. Net income increased by 7% to $3.7 million, or $0.50
per diluted share ($0.51 per basic share), compared with $3.5 million, or
$0.48 per diluted share ($0.49 per basic share), in the second quarter of
2013.

H1 2014: Revenues for the first half of 2014 increased by 20% to $36.9 million
from $30.7 million in the first half of 2013.

On a GAAP basis, operating income for the period increased by 25% to $8.5
million compared with $6.8 million in the first six months of 2013. Net income
increased by 15% to $7.4 million, or $1.00 per diluted share ($1.03 per basic
share), compared with $6.4 million, or $0.89 per diluted share ($0.90 per
basic share), in the first half of 2013.

On a non-GAAP basis (as described and reconciled below), operating income for
the period increased by 27% to $9.0 million compared with $7.1 million in the
first six months of 2013. Net income increased by 17% to $7.9 million, or
$1.07 per diluted share ($1.10 per basic share), compared with $6.7 million,
or $0.93 per diluted share ($0.95 per basic share), in the first six months of
2013.

Comments of Management

Commenting on the results, Shaike Orbach, President and CEO, said, “We have
reported solid year-over-year growth for both the quarter and the first half
of 2014, however softer demand in Q2 resulted in a 6% sequential revenue
decline compared with the first quarter of 2014. While these challenges may
remain with us for the short term, we continue to believe in the long-term
power of our growth engines: especially our more than 100 existing customers,
many of whom are industry leaders, our proven portfolio of mission-critical
products, and our impressive roadmap of innovative new product lines that give
us entry into high-potential new opportunities. As such, we continue
implementing our proven strategy for building our business and pursuing our
goals.”

                                      ##

Conference Call
Silicom’s Management will host an interactive conference today, July 22^nd, at
9am Eastern Time (6am Pacific Time, 4pm Israel Time) to review and discuss its
second quarter 2014 results and guidance for the full year 2014.

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.

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, 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.

                                      ##

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

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,
                                               2014        2013
                                                               
Assets
                                                               
Current assets
Cash and cash equivalents                      $ 15,525    $   12,997
Short-term bank deposits                         -             3,000
Marketable securities                            15,094        14,871
Accounts receivables: Trade, net                 14,553        14,866
Accounts receivables: Other                      1,690         2,460
Inventories                                      28,239        28,778
Deferred tax assets                             506          274
Total current assets                             75,607        77,246
                                                               
Marketable securities                            23,731        24,370
Assets held for employees’ severance benefits    1,584         1,543
Deferred tax assets                              432           439
Property, plant and equipment, net               2,258         1,479
Intangible assets, net                          147          180
                                                               
Total assets                                   $ 103,759   $   105,257
                                                               
Liabilities and shareholders' equity
                                                               
Current liabilities
Trade accounts payable                         $ 3,569     $   6,814
Other accounts payable and accrued expenses     5,346        5,134
Total current liabilities                        8,915         11,948
                                                               
Liability for employees’ severance benefits     2,694        2,618
                                                               
Total liabilities                               11,609       14,566
                                                               
Shareholders' equity
Ordinary shares and additional paid-in capital   39,914        38,647
Treasury shares                                  (38)          (38)
Retained earnings                               52,274       52,082
Total shareholders' equity                      92,150       90,691
                                                               
Total liabilities and shareholders' equity     $ 103,759   $   105,257

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,
                                     2014       2013       2014       2013
Sales                                $ 17,918   $ 15,715   $ 36,922   $ 30,745
Cost of sales                         10,730    9,414     21,996    18,415
Gross profit                          7,188     6,301     14,926    12,330
                                                                        
Research and development expenses      1,586      1,345      3,044      2,589
Selling and marketing expenses         1,082      864        2,062      1,713
General and administrative expenses   619       613       1,285     1,227
Total operating expenses              3,287     2,822     6,391     5,529
                                                                        
Operating income                       3,901      3,479      8,535      6,801
                                                                        
Financial income, net                 58        62        163       180
Income before income taxes             3,959      3,541      8,698      6,981
Income taxes                          632       252       1,323     589
Net income                           $ 3,327    $ 3,289    $ 7,375    $ 6,392
                                                                        
                                                                        
                                                                        
Basic income per ordinary share      $ 0.46     $ 0.46     $ 1.03     $ 0.90
(US$)
                                                                        
Weighted average number of ordinary
shares used to compute basic income   7,183     7,115     7,179     7,089
per share (in thousands)
                                                                        
                                                                        
Diluted income per ordinary share    $ 0.45     $ 0.45     $ 1.00     $ 0.89
(US$)
                                                                        
Weighted average number of ordinary
shares used to compute diluted        7,337     7,263     7,340     7,218
income per share (in thousands)

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,
                            2014         2013         2014          2013
                                                                       
GAAP gross profit           $  7,188     $  6,301     $  14,926     $  12,330
(1) Share-based               35          26          59           51
compensation (*)
Non-GAAP gross profit       $  7,223     $  6,327     $  14,985     $  12,381
                                                                       
GAAP operating income       $  3,901     $  3,479     $  8,535      $  6,801
(1) Share-based                339          167          467           332
compensation (*)
(2) Amortization of           16          -           33           -
intangible assets
Non-GAAP operating income   $  4,256     $  3,646     $  9,035      $  7,133
                                                                       
GAAP net income             $  3,327     $  3,289     $  7,375      $  6,392
(1) Share-based                339          167          467           332
compensation (*)
(2) Amortization of           16          -           33           -
intangible assets
Non-GAAP net income         $  3,682     $  3,456     $  7,875      $  6,724
                                                                       
                                                                       
GAAP basic income per       $  0.46      $  0.46      $  1.03       $  0.90
ordinary share (US$)
(1) Share-based                0.05         0.03         0.07          0.05
compensation (*)
(2) Amortization of            -            -            -             -
intangible assets
                                                                
Non-GAAP basic income per   $  0.51      $  0.49      $  1.10       $  0.95
ordinary share (US$)
                                                                       
                                                                       
GAAP diluted income per     $  0.45      $  0.45      $  1.00       $  0.89
ordinary share (US$)
(1) Share-based                0.05         0.03         0.07          0.04
compensation (*)
(2) Amortization of            -            -            -             -
intangible assets
                                                                
Non-GAAP diluted income per $  0.50      $  0.48      $  1.07       $  0.93
ordinary share (US$)
                                                                       
                                                                       
                                                                       
(*) Adjustments related to share-based compensation expenses according to ASC
topic 718 (SFAS 123 (R))

Contact:

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