Momentum Continues at Silicom
Ken Nagy, CFA
On April 23, 2012,
Silicom Ltd (
the provider of high-performance server and appliances networking
solutions, reported financial results for its fiscal 2012 first
quarter, ended March 31, 2012.
The Company's solid momentum continued with 29 quarters of unbroken
profitability and revenues doubling and net profit tripling in two
Silicom's first quarter revenues improved year over year by just
over 10 percent to $10.101 million, which compares to revenues of
$9.177 million for the three months ended March 31, 2011.
The strong results were primarily driven by strong demand from the
Company's 85 plus OEM customers that supply a variety of networking
Operating income for the first quarter increased year over year by
over 12 percent to $1.906 million, mainly as a result of the
improved revenues and lower total operating expenses as a
percentage of revenues which were offset by lower gross margin.
Gross margin for the three months ended March 31, 2012, fell to
41.2 percent compared to 43.4 percent for the first quarter, ended
March 31, 2011.
Although total operating expenses increased year over year by
$46,000, they fell to 22.3 percent of revenues from 24.1 percent
during the first quarter of 2011.
On a GAAP basis, the Company's first quarter net income increased
year over year by just over 12 percent or $212,000 to $1.977
million from net income of $1.765 million for the comparable
quarter of 2011.
Here again, the increase in net income was a result of increased
revenues and lower total operating expenses as a percentage of
revenues which were offset by lower gross margin.
Based on a weighted average number of diluted shares of 7.022
million shares, diluted net income per share for the first quarter
resulted in net income of $0.28 per diluted share during the first
quarter of fiscal 2012. This compared to a diluted net income
per share of $0.25 on a weighted average number of diluted shares
of 7.013 million shares during the three months ended March 31,
On a non-GAAP basis, which excludes non-cash share-based
compensation, the Company reported first quarter net income of
$2.075 million compared to non-GAAP net income of $1.882 million
for the quarter ended March 31, 2011.
Silicom's cash, cash equivalents, bank deposits and marketable
securities totaled $51.3 million or $7.41 per outstanding share
which is an improvement from the $49.2 million, or $7.10 per
outstanding share as of December 31, 2011, and a year over year
increase of $2.1 million.
The improvement of assets provides the Company with a substantial
level of working capital and financial flexibility, placing Silicom
in a position of strength and stability, enabling the Company to
continue to invest in its business as well as take advantage of
opportunities as they arise.
It should be noted that during the first quarter, ended March 31,
2012, the Company announced a major new SETAC design win, with
significant long-term potential and which was to a customer outside
of Silicom's primary target market.
The success of this new contract as well as other recent SETAC
design wins demonstrates SETAC's broad market appeal and its
potential to become a powerful future revenue driver for the
Silicom's cost competitive SETAC (Server To Appliance Converter)
product family, offers a distinctive growth opportunity that
enables the Company to offer a full network appliance platform
solution. This new product line permits Silicom to address
new market segments as well as obtain nearly unlimited potential
with the its existing customer base.
Furthermore, the Company believes that industry fundamentals remain
strong and continue to accelerate, driven by rising internet
traffic, cloud computing and virtualization.
Likewise, Silicom expects significant growth in 2012 and beyond as
it continues to see strong traction for its traditional products
and growing interest in its new product lines, which it believes
will contribute significantly to its future growth.
Similarly, the continued ramp up of need and demand for its product
lines should bring steady growth in demand from existing and new
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