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Silicom Reports Financial Results for the 3rd Quarter and First Nine Months of 2014

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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 nine months ended September 30, 2014.

Financial Results

Q3 2014: Revenues for the third quarter totalled $15.9 million compared with $17.2 million in the third quarter of 2013.

On a GAAP basis, operating income for the quarter totalled $3.1 million compared with $4.1 million in the third quarter of 2013. Net income for the quarter totalled $2.5 million, or $0.34 per diluted share ($0.35 per basic share), compared with $4.0 million, or $0.55 per diluted share ($0.57 per basic share), in the third quarter of 2013.

On a non-GAAP basis (as described and reconciled below), operating income for the quarter totalled $3.5 million compared with $4.2 million in the third quarter of 2013. Net income was $3.0 million, or $0.41 per basic and diluted share, compared with $4.2 million, or $0.58 per diluted share ($0.59 per basic share), in the third quarter of 2013.

First Nine Months of 2014: Revenues for the first nine months of 2014 increased by 10% to $52.8 million from $47.9 million in the first nine months of 2013.

On a GAAP basis, operating income for the period totalled $11.6 million compared with $10.9 million in the first nine months of 2013. Net income totalled $9.9 million, or $1.35 per diluted share ($1.38 per basic share), compared with $10.4 million, or $1.44 per diluted share ($1.47 per basic share), in the first nine months of 2013.

On a non-GAAP basis (as described and reconciled below), operating income for the period totalled $12.5 million compared with $11.4 million in the first nine months of 2013. Net income totalled $10.8 million, or $1.48 per diluted share ($1.51 per basic share), compared with $10.9 million, or $1.51 per diluted share ($1.54 per basic share), in the first nine months of 2013.

Comments of Management

Commenting on the results, Shaike Orbach, President and CEO, said, “We continue to develop the Company in line with our model for both the short-term and the long-term, positioning us to achieve our financial and strategic objectives. During the quarter, we were very pleased to announce a breakthrough Coleto Creek win as well as a significant design win with a leading Application Delivery provider, achievements that are enhancing the Company’s penetration of its target markets. In parallel, we continue working to deliver on the full potential of our multiple growth engines – especially our 100+ customer base, industry insight, superior core technologies and extensive existing product portfolio.”

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Conference Call Details
Silicom’s Management will host an interactive conference today, October 23rd, 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, 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)
September 30, December 31,
2014 2013
Assets
Current assets
Cash and cash equivalents $ 19,572 $ 12,997
Short-term bank deposits - 3,000
Marketable securities 15,449 14,871
Accounts receivables: Trade, net 15,045 14,866
Accounts receivables: Other 682 2,460
Inventories 26,531 28,778
Deferred tax assets 498 274
Total current assets 77,777 77,246
Marketable securities 23,469 24,370
Assets held for employees’ severance benefits 1,494 1,543
Deferred tax assets 390 439
Property, plant and equipment, net 2,415 1,479
Intangible assets, net 130 180
Total assets $ 105,675 $ 105,257
Liabilities and shareholders’ equity
Current liabilities
Trade accounts payable $ 3,144 $ 6,814
Other accounts payable and accrued expenses 4,913 5,134
Total current liabilities 8,057 11,948
Liability for employees’ severance benefits 2,528 2,618
Total liabilities 10,585 14,566
Shareholders’ equity
Ordinary shares and additional paid-in capital 40,346 38,647
Treasury shares (38) (38)
Retained earnings 54,782 52,082
Total shareholders’ equity 95,090 90,691
Total liabilities and shareholders’ equity $ 105,675 $ 105,257
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,
2014 2013 2014 2013
Sales $ 15,866 $ 17,200 $ 52,788 $ 47,945
Cost of sales 9,432 10,183 31,428 28,598
Gross profit 6,434 7,017 21,360 19,347
Research and development expenses 1,668 1,305 4,712 3,894
Selling and marketing expenses 1,034 1,004 3,096 2,717
General and administrative expenses 673 636 1,958 1,863
Total operating expenses 3,375 2,945 9,766 8,474
Operating income 3,059 4,072 11,594 10,873
Financial income, net 7 100 170 280
Income before income taxes 3,066 4,172 11,764 11,153
Income taxes 558 152 1,881 741
Net income $ 2,508 $ 4,020 $ 9,883 $ 10,412
Basic income per ordinary share (US$) $ 0.35 $ 0.57 $ 1.38 $ 1.47

Weighted average number of ordinary shares used to
compute basic income per share (in thousands)

7,183 7,115 7,180 7,098
Diluted income per ordinary share (US$) $ 0.34 $ 0.55 $ 1.35 $ 1.44

Weighted average number of ordinary shares used to
compute diluted income per share (in thousands)

7,290 7,276 7,323 7,238
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,
2014 2013 2014 2013
GAAP gross profit $ 6,434 $ 7,017 $ 21,360 $ 19,347
(1) Share-based compensation (*) 39 26 98 77
Non-GAAP gross profit $ 6,473 $ 7,043 $ 21,458 $ 19,424
GAAP operating income $ 3,059 $ 4,072 $ 11,594 $ 10,873
(1) Share-based compensation (*) 433 170 900 502
(2) Amortization of intangible assets 17 3 50 3
Non-GAAP operating income $ 3,509 $ 4,245 $ 12,544 $ 11,378
GAAP net income $ 2,508 $ 4,020 $ 9,883 $ 10,412
(1) Share-based compensation (*) 433 170 900 502
(2) Amortization of intangible assets 17 3 50 3
Non-GAAP net income $ 2,958 $ 4,193 $ 10,833 $ 10,917
GAAP basic income per ordinary share (US$) $ 0.35 $ 0.57 $ 1.38 $ 1.47
(1) Share-based compensation (*) 0.06 0.02 0.12 0.07
(2) Amortization of intangible assets - 0.01
Non-GAAP basic income per ordinary share (US$) $ 0.41 $ 0.59 $ 1.51 $ 1.54
GAAP diluted income per ordinary share (US$) $ 0.34 $ 0.55 $ 1.35 $ 1.44
(1) Share-based compensation (*) 0.07 0.03 0.12 0.07
(2) Amortization of intangible assets - 0.01
Non-GAAP diluted income per ordinary share (US$) $ 0.41 $ 0.58 $ 1.48 $ 1.51
(*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

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