Silicom Sees Progress in all Target Markets - Analyst Blog

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Silicom Sees Progress in all Target Markets

Ken Nagy, CFA

On July 23, 2012, Silicom Ltd ( SILC ), the provider of high-performance server and appliances networking solutions, reported financial results for its fiscal 2012 second quarter and six months, ended June 30, 2012.

The Company's steady momentum continued with second quarter revenues improving year over year by just over 11 percent to $10.413 million, which compares to revenues of $9.357 million for the three months ended June 30, 2011.

Operating income for the second quarter increased year over year by over 13 percent to $2.256 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.

Although total operating expenses increased year over year by $17,000, they fell to 20.8 percent of revenues from 23.0 percent of revenue during the second quarter of 2011.

Gross margin for the three months ended June 30, 2012, fell to 42.5 percent compared to 44.3 percent for the second quarter, ended June 30, 2011.

On a GAAP basis, the Company's second quarter net income increased year over year by nearly 16 percent or $308,000 to $2.282 million from net income of $1.974 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 was offset by lower gross margin.

Based on a weighted average number of diluted shares of 7.020 million shares, diluted net income per share resulted in net income of $0.33 per diluted share during the second quarter of fiscal 2012.  This compared to a diluted net income per share of $0.28 on a weighted average number of diluted shares of 7.026 million shares during the three months ended June 30, 2011.

On a non-GAAP basis, which excludes non-cash share-based compensation, the Company reported second quarter net income of $2.380 million or $0.34 per diluted share. This compares to non-GAAP net income of $2.082 million or $0.30 per diluted share for the quarter ended June 30, 2011.

For the six months ended June 30, 2012, year over year revenues improved by 10.7 percent or $1.106 million to $20.514 million from $18.534 million for the half of fiscal 2011.

GAAP Net income for the six months jumped by $520,000 year over year to $4.259 million for the six months ended June 30, 2012. This compares to $3.739 million for the comparable six months ended June 30, 2011.

Here again, the year over year jump in net income was a primarily a result of higher revenues as well as a drop in total operating expenses as a percentage of revenues which was offset by lower gross margin.

Total operating expenses increased year over year by $63,000, but fell to 21.6 percent of revenues from 23.5 percent during the first half of 2011.

Gross margin for the six months fell to 41.9 percent compared to gross margin of 43.8 percent for the six months ended June 30, 2011.

Based on a weighted average number of diluted shares of 7.021 million shares, diluted net income per share resulted in net income of $0.61 per diluted share during the first six months of fiscal 2012.  This compared to a diluted net income per share of $0.53 on a weighted average number of diluted shares of 7.019 million shares during the six months ended June 30, 2011.

On a non-GAAP basis that excludes non-cash share-based compensation, net income for the first six months of 2012 increased year over year by 12.4 percent to $4.455 million and non-GAAP earnings per diluted share for the first six months of 2012 jumped to $0.63 compared to $0.56 for the six months ended June 30, 2011.

Silicom's cash, cash equivalents, bank deposits and marketable securities totaled $52.9 million or $7.63 per outstanding share which is a sequential improvement from the $51.3 million, or $7.41 per outstanding share as of March 31, 2012.

It should further be noted that during the second quarter, the Company announced a first big win with an emerging Big Data player as well as its receiving a patent for its SETAC concept.

The issued patent gives Silicom exclusiveness on a product line that is becoming increasingly recognized as a crucial component in the manufacture of next-generation network appliances.

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, Silicom's management believes that the progress in data is leading to growth in all of its target markets, which in turn is creating the possibility for more tenders, design wins, new applications and new implementations of existing applications.

 

Please visit scr.zacks.com to access a free copy of the full SILC research report.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

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