EX-99.1 2 exhibit_99-1.htm EXHIBIT 99.1
Exhibit 99.1


FOR IMMEDIATE RELEASE

EARNINGS RELEASE
 
Silicom Reports Q2 2019 Financial Results
- $25.4M Revenues with $0.38 EPS  -

KFAR SAVA, Israel, July 25, 2019 - Silicom Ltd. (NASDAQ: SILC), a leading provider of high-performance networking and data infrastructure solutions, today reported its financial results for the second quarter and first half ended June 30, 2019.
 
Financial Results
 
Second Quarter: Silicom’s revenues for the second quarter of 2019 totalled $25.4 million compared with $27.6 million for the second quarter of 2018.
 
On a GAAP basis, net income for the quarter totalled $2.3 million, or $0.30 per share (basic and diluted), compared with $2.4 million, or $0.32 per share (basic and diluted), for the second quarter of 2018.
 
On a non-GAAP basis (as described and reconciled below), net income for the quarter totalled $2.9 million, or $0.38 per share (basic and diluted), compared with $3.4 million, or $0.44 per diluted share ($0.45 per basic share), for the second quarter of 2018.
 
First Six Months: Silicom’s revenues for the first half of 2019 totalled $55.6 million compared with $57.1 million for the first half of 2018.
 
On a GAAP basis, net income for the period totalled $5.9 million, or $0.77 per diluted share ($0.78 per basic share), compared with $1.0 million, or $0.13 per share (basic and diluted), for the first half of 2018.
 
On a non-GAAP basis (as described and reconciled below), net income for the period totalled $6.9 million, or $0.91 per share (basic and diluted), compared with $7.7 million, or $1.00 per diluted share ($1.02 per basic share), for the first half of 2018.
 
Guidance for the Third Quarter
 
Management projects that revenues for the third quarter of 2019 will total $24 to $25 million.
 
Comments of Management
 
Shaike Orbach, Silicom’s President and CEO, commented, “We are pleased to report another solid quarter with revenues in line with our guidance, continued profitability and cash generation. While our short term visibility remains low due to the unclear ramp-up timing and patterns of a few of our major SD-WAN and NFV design wins, we are encouraged by the significant growth in the quantity of our SD-WAN systems that are being deployed through our customers in the market. Unfortunately, this growth is not yet reflected in our top-line revenues due to the excess inventory accumulated by one of our major SD-WAN customers, resulting in a delay of planned orders. We believe that once this excess inventory is depleted and the ramp-up rate of a few of our existing Design Wins progresses, our overall revenues will return to growth in 2020, even before winning new business.

“In parallel, we remain strongly confident about the potential of our FPGA and SD-WAN product lines as long-term revenue drivers that will add fuel to our growth. Momentum for these offerings has already started to build: we announced several FPGA wins that will begin to translate into revenues next year, and we are working to transform a significant portion of our FPGA and SD-WAN pipeline into new wins. At the same time, we continue to invest in expanding our technological lead in the space. The availability of our unique Packet Mover and other FPGA capabilities has already begun attracting interest from clients beyond our traditional Cloud/Data Center/Networking target markets, as demonstrated by a technology giant’s selection of Silicom to design a customized 400G FPGA networking card. Any wins in these additional target markets will add to the significant potential of our wins in the Cloud/Data Center/Networking markets, which remain the focus of our investment and activities.  In parallel, the launch of our powerful new Intel Xeon-D (D2100)-based Edge Computing Platform for streamlining the deployment of white box services opens up opportunities in the high-potential Edge Computing market.”
 
Mr. Orbach continued, “As a long-term player, we continue to invest in developing our client relationships, technology and products. With a strong balance sheet, growing markets, a superior product portfolio and excellent customer relationships, we are well positioned and confident in our prospects.”
 
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.
 
***
 
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, amortization of acquired intangible assets, taxes on amortization of acquired intangible assets, as well as discontinued project-related write-offs. 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.
 
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About Silicom
 
Silicom Ltd. is an industry-leading provider of high-performance networking and data infrastructure solutions. Designed primarily to improve performance and efficiency in Cloud and Data Center environments, Silicom’s solutions increase throughput, decrease latency and boost the performance of servers and networking appliances, the infrastructure backbone that enables advanced Cloud architectures and leading technologies like NFV, SD-WAN and Cyber Security. Our innovative solutions for high-density networking, high-speed fabric switching, offloading and acceleration, which utilize a range of cutting-edge silicon technologies as well as FPGA-based solutions, are ideal for scaling-up and scaling-out cloud infrastructures.
 
Silicom products are used by major Cloud players, service providers, telcos and OEMs as components of their infrastructure offerings, including both add-on adapters in the Data Center and stand-alone virtualized/universal CPE devices at the edge.
 
Silicom’s long-term, trusted relationships with more than 150 customers throughout the world, its more than 400 active Design Wins and more than 300 product SKUs have made Silicom a “go-to” connectivity/performance partner of choice for technology leaders around the globe.
 
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, Silicom's increasing dependence for substantial revenue growth on a limited number of customers in the evolving cloud-based, SD-WAN, NFV and Edge markets, the speed and extent to which solutions are adopted by these markets, likelihood that Silicom will rely increasingly on customers which provide solutions in these evolving markets, resulting in an increasing dependence on a smaller number of larger customers, difficulty in commercializing and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property, competition and other factors detailed in the company's periodic filings with the Securities and Exchange Commission. These forward-looking statements can generally be identified as such because the context of the statement will include words, such as “expects,” “should,” “believes,” “anticipates” or words of similar import. Similarly, statements that describe future plans, objectives or goals are also forward-looking statements. In light of significant risks and uncertainties inherent in forward-looking statements, the inclusion of such statements should not be regarded as a representation by the company that it will achieve such forward-looking statements. The company disclaims any duty to update such statements, whether as a result of new information, future events, or otherwise.
 
Company Contact:
Eran Gilad, CFO
Silicom Ltd.
Tel: +972-9-764-4555
E-mail: erang@silicom.co.il
Investor Relations Contact:
Ehud Helft / Gavriel Frohwein
GK Investor Relations
Tel: +1 646 668 3559
E-mail: silicom@gkir.com
 
-- FINANCIAL TABLES FOLLOW –
 
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Silicom Ltd. Consolidated Balance Sheets
(US$ thousands)

   
June 30,
    
December 31,
  
   
2019
    
2018
  
             
Assets
            
             
Current assets
            
Cash and cash equivalents
  
$
14,467
    
$
26,808
  
Short-term bank deposits
    
13,507
      
-
  
Marketable securities
    
5,916
      
1,600
  
Accounts receivables: Trade, net
    
22,046
      
23,817
  
Accounts receivables: Other
    
7,451
      
9,487
  
Inventories
    
34,245
      
42,369
  
Total current assets
    
97,632
      
104,081
  
                 
Marketable securities
    
53,513
      
45,612
  
Assets held for employees’ severance benefits
    
1,628
      
1,517
  
Deferred tax assets
    
1,719
      
894
  
Property, plant and equipment, net
    
3,611
      
3,670
  
Intangible assets, net
    
1,334
      
966
  
Right of Use
    
3,615
      
-
  
Goodwill
    
25,561
      
25,561
  
Total assets
  
$
188,613
    
$
182,301
  
                 
Liabilities and shareholders' equity
                
                 
Current liabilities
                
Trade accounts payable
  
$
11,384
    
$
15,407
  
Other accounts payable and accrued expenses
    
6,631
      
6,133
  
Lease Liabilities
    
1,399
      
-
  
                 
Total current liabilities
    
19,414
      
21,540
  
                 
Lease Liabilities
    
2,140
      
-
  
Liability for employees’ severance benefits
    
2,868
      
2,612
  
                 
Total liabilities
    
24,422
      
24,152
  
                 
Shareholders' equity
                
Ordinary shares and additional paid-in capital
    
55,920
      
54,643
  
Treasury shares
    
(1,191
)
    
(38
)
Retained earnings
    
109,462
      
103,544
  
Total shareholders' equity
    
164,191
      
158,149
  
                 
Total liabilities and shareholders' equity
  
$
188,613
    
$
182,301
  

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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,
  
   
2019
    
2018
    
2019
    
2018
  
Sales
  
$
25,402
    
$
27,603
    
$
55,629
    
$
57,125
  
Cost of sales
    
16,728
      
18,714
      
36,775
      
43,686
  
Gross profit
    
8,674
      
8,889
      
18,854
      
13,439
  
                                 
Research and development expenses
    
3,659
      
3,647
      
7,479
      
7,078
  
Selling and marketing expenses
    
1,692
      
1,596
      
3,321
      
3,132
  
General and administrative expenses
    
1,054
      
1,068
      
2,077
      
1,975
  
Total operating expenses
    
6,405
      
6,311
      
12,877
      
12,185
  
                                 
Operating income (loss)
    
2,269
      
2,578
      
5,977
      
1,254
  
                                 
Financial income, net
    
430
      
200
      
725
      
484
  
Income (Loss) before income taxes
    
2,699
      
2,778
      
6,702
      
1,738
  
Income taxes
    
421
      
342
      
784
      
741
  
Net income (loss)
  
$
2,278
    
$
2,436
    
$
5,918
    
$
997
  
                                 
Basic income (loss) per ordinary share (US$)
  
$
0.30
    
$
0.32
    
$
0.78
    
$
0.13
  
                                 
Weighted average number of ordinary shares used to compute basic income per share (in thousands)
    
7,587
      
7,550
      
7,587
      
7,550
  
                                 
Diluted income (loss) per ordinary share (US$)
  
$
0.30
    
$
0.32
    
$
0.77
    
$
0.13
  
                                 
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)
    
7,635
      
7,629
      
7,644
      
7,671
  

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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,
  
   
2019
    
2018
    
2019
    
2018
  
                         
GAAP gross profit
  
$
8,674
    
$
8,889
    
$
18,854
    
$
13,439
  
(1) Share-based compensation (*)
    
106
      
87
      
222
      
146
  
(2) Discontinued project-related write-offs
    
-
      
-
      
-
      
4,985
  
Non-GAAP gross profit
  
$
8,780
    
$
8,976
    
$
19,076
    
$
18,570
  
                                 
GAAP operating income (loss)
  
$
2,269
    
$
2,578
    
$
5,977
    
$
1,254
  
Gross profit adjustments
    
106
      
87
      
222
      
5,131
  
(1) Share-based compensation (*)
    
457
      
522
      
995
      
923
  
(2) Discontinued project-related write-offs
    
-
      
-
      
-
      
13
  
(3) Amortization of acquired intangible assets
    
-
      
314
      
-
      
617
  
Non-GAAP operating income
  
$
2,832
    
$
3,501
    
$
7,194
    
$
7,938
  
                                 
GAAP net income (loss)
  
$
2,278
    
$
2,436
    
$
5,918
    
$
997
  
Operating income adjustments
    
563
      
923
      
1,217
      
6,684
  
(4) Taxes on amortization of acquired intangible assets
    
67
      
8
      
(211
)
    
16
  
Non-GAAP net income
  
$
2,908
    
$
3,367
    
$
6,924
    
$
7,697
  
                                 
GAAP net income (loss)
  
$
2,278
    
$
2,436
    
$
5,918
    
$
997
  
Adjustments for Non-GAAP cost of sales
    
106
      
87
      
222
      
5,131
  
Adjustments for Non-GAAP Research and development expenses
    
217
      
420
      
463
      
770
  
Adjustments for Non-GAAP Selling and marketing expenses
    
117
      
252
      
256
      
480
  
Adjustments for Non-GAAP General and administrative expenses
    
123
      
164
      
276
      
303
  
Adjustments for Non-GAAP Income taxes
    
67
      
8
      
(211
)
    
16
  
Non-GAAP net income
  
$
2,908
    
$
3,367
    
$
6,924
    
$
7,697
  
                                 
GAAP basic income (loss) per ordinary share (US$)
  
$
0.30
    
$
0.32
    
$
0.78
    
$
0.13
  
(1) Share-based compensation (*)
    
0.07
      
0.08
      
0.16
      
0.14
  
(2) Discontinued project-related write-offs
    
-
      
-
      
-
      
0.66
  
(3-4) Acquisition-related adjustments
    
0.01
      
0.05
      
(0.03
)
    
0.09
  
Non-GAAP basic income per ordinary share (US$)
  
$
0.38
    
$
0.45
    
$
0.91
    
$
1.02
  
                                 
GAAP diluted income (loss) per ordinary share (US$)
  
$
0.30
    
$
0.32
    
$
0.78
    
$
0.13
  
(1) Share-based compensation (*)
    
0.07
      
0.08
      
0.16
      
0.14
  
(2) Discontinued project-related write-offs
    
-
      
-
      
-
      
0.65
  
(3-4) Acquisition-related adjustments
    
0.01
      
0.04
      
(0.03
)
    
0.08
  
Non-GAAP diluted income per ordinary share (US$)
  
$
0.38
    
$
0.44
    
$
0.91
    
$
1.00
  
 
(*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

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