Silicom Reports Financial Results for Full Year and Q4 2021

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    <br /> Silicom Reports Financial Results for Full Year and Q4 2021<br />

    – 20% YoY growth in revenues, 50% increase in non-GAAP operating margin and 31% growth in non-GAAP EPS –

    PR Newswire

    KFAR SAVA,

    Israel

    ,

    Jan. 27, 2022

    /PRNewswire/ — Silicom Ltd. (NASDAQ: SILC), a leading provider of high-performance networking and data infrastructure solutions, today reported its financial results for the fourth quarter and full year ended

    December 31, 2021

    .

    Silicom Ltd


    Financial Results



    Full Year:


    Silicom’s full year revenues for 2021 totalled

    $128.5 million

    , up 20% compared with

    $107.4 million

    for 2020.

    On a GAAP basis, net income for the period totalled

    $10.5 million

    , up 84% compared with

    $5.7 million

    for 2020. GAAP earnings per share reached

    $1.51

    per diluted share (

    $1.54

    per basic share) compared with

    $0.80

    per share (basic and diluted) for

    2020

    .

    On a non-GAAP basis (as described and reconciled below), net income for the year totalled

    $14.0 million

    , up 27% compared with

    $11.0 million

    for 2020. Non-GAAP earnings per share for the year totalled

    $2.01

    per diluted share (

    $2.05

    per basic share), up 31% compared with

    $1.54

    per share (basic and diluted) for 2020.



    Fourth Quarter:


    Silicom’s revenues for the fourth quarter of 2021 totalled

    $36.3 million

    , up 7% compared with

    $33.9 million

    for the fourth quarter of 2020.

    On a GAAP basis, net income for the quarter totalled

    $3.3 million

    compared with

    $0.8 million

    for the fourth quarter of 2020. GAAP earnings per share rose to

    $0.48

    per diluted share (

    $0.49

    per basic share) compared with

    $0.12

    per share (basic and diluted) for the fourth quarter of 2020.

    On a non-GAAP basis (as described and reconciled below), net income for the quarter totalled

    $4.5 million

    , up 14% compared with

    $4.0 million

    for the fourth quarter of 2020. Non-GAAP earnings per share increased to

    $0.65

    per diluted share (

    $0.67

    per basic share) compared with

    $0.56

    per diluted share (

    $0.57

    per basic share) for the fourth quarter of 2020.


    Guidance for 2022

    While we see dramatic growth in demand for 2022, our guidance for the first quarter of 2022 is also impacted by the global components crisis, which could limit our ability to fulfill the demand. As such, Management projects that revenues for the first quarter of 2022 will range between

    $31 million

    and

    $33 million

    , a level that is much lower than we would have forecast based only on demand.

    Given our very long and growing list of design wins that continues to generate strong demand, we continue to project double-digit growth in 2022 and beyond.


    Comments of Management


    Shaike Orbach

    , Silicom’s President and CEO

    ,

    commented, “2021 was a great year for Silicom: an inflection point in the demand for our products during which SD-WAN’s coming-of-age brought us design wins of a whole new scale – some with 10x the revenue potential of past wins – along with numerous large opportunities. We therefore believe that we are on the road to massive growth, though the timing will depend, to some extent, upon the constraints created by the global components crisis.

    “In light of this crisis, which negatively impacted our 2021 revenues by several million dollars, we are particularly proud to have delivered 20% growth in revenues for the year and 50% growth in our operating margin, a clear demonstration of the leverage built into our business model and the flexibility of our operations.”

    Mr. Orbach continued, “The source of our growth continues to be the disaggregation and decoupling trend, one of the most significant transitions of IT architecture in a decade. We have been preparing for this trend for the past five years, developing critical technologies and products needed for its success while creating important relationships with both hardware and software partners.

    “Today, with the SD-WAN market having reached the growth phase of its lifecycle, this strategy has begun to prove itself. In 2021, our revenues from Smart Edge products reached tens of millions of dollars, and they look likely to climb much higher in the years ahead. For example, during the fourth quarter a leading American service provider awarded us a major Smart Edge design win along with

    $30 million

    in current purchase orders, while forecasting a

    $50 million

    per year future run-rate. Similarly, one of the world’s networking equipment giants selected our SD-WAN Smart Platform for its branded solution, while forecasting a run-rate of tens of millions per year in full ramp up. The potential of this market alone would be enough to drive significant growth for our company.

    “However, we believe this growth will be compounded by 5G/O-RAN, a market with characteristics similar to SD-WAN that operates within the same disaggregation and decoupling environment. Once it moves from the product development and initial deployment stages, where it is now, to its own growth phase, it is likely to become another growth driver for Silicom. During 2021, several industry leaders selected our 5G accelerators for their initial O-RAN networks, and we are in numerous discussions regarding additional opportunities. As O-RAN enters the mainstream and we build out our O-RAN product offerings, we believe these early wins will represent just the tip of the iceberg.”

    Mr. Orbach concluded, “Despite this strong momentum, the uncertainties of the components crisis make it difficult to predict the rate at which we will be able to fill orders, and therefore to grow our revenues over the short term. Nonetheless, we remain confident in our ability to deliver double digit growth in 2022, and believe that resolution of the crisis will lead immediately to a steep growth curve in step with the market’s massive transition to next-generation networks and its clear need for Silicom solutions.”


    Conference Call Details

    Silicom’s Management will host an interactive conference today,

    January 27th

    , at

    9am Eastern Time

    (

    6am Pacific Time

    ,

    4pm

    Israel Time) to review and discuss the results.

    To participate, investors may either listen via a webcast link hosted on Silicom’s website or via the dial-in. The link is under the investor relations’ webcast section of Silicom’s website at

    Webcasts


    For those that wish to dial in via telephone, one of the following teleconferencing numbers may be used:

    US: 1 866 860 9642


    ISRAEL

    : 03 918 0609

    INTERNATIONAL:  +972 3 918 0609

    At:

    9:00am Eastern Time

    ,

    6:00am Pacific Time

    ,

    4:00pm

    Israel Time

    It is advised to connect to the conference call a few minutes before the start.

    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 above-mentioned webcast 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, taxes on amortization of acquired intangible assets, lease liabilities – financial expenses (income), as well as impairment 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 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 200 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, disruptions to our manufacturing and development along with general disruptions to the entire world economy relating to the spread of the novel coronavirus (COVID-19) 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:


    [email protected]




    Investor Relations Contact:



    Ehud Helft



    GK Investor Relations



    Tel: +1 212 378 8040



    E-mail:




    [email protected]


    — FINANCIAL TABLES FOLLOW –



    Silicom Ltd. Consolidated Balance Sheets


    (US$ thousands)



    December 31,



    December 31,



    2021



    2020



    Assets



    Current assets


    Cash and cash equivalents



    $



    29,285


    $


    20,676


    Short-term bank deposits



    –


    5,000


    Marketable securities



    8,266


    35,117


    Accounts receivables: Trade, net



    31,120


    21,660


    Accounts receivables: Other



    3,842


    6,126


    Inventories



    75,753


    47,650



    Total current assets



    148,266


    136,229



    Marketable securities



    23,773


    15,281



    Assets held for employees’ severance benefits



    1,882


    1,833



    Deferred tax assets



    2,445


    1,790



    Property, plant and equipment, net



    4,576


    4,110



    Intangible assets, net



    4,314


    1,170



    Right of Use



    8,765


    9,913



    Goodwill



    25,561


    25,561



    Total assets



    $



    219,582


    $


    195,887



    Liabilities and shareholders’ equity



    Current liabilities


    Trade accounts payable



    $



    29,918


    $


    14,610


    Other accounts payable and accrued expernses



    18,564


    12,953


    Lease Liabilities



    1,811


    1,813



    Total current liabilities



    50,293


    29,376



    Lease Liabilities



    7,377


    8,282



    Liability for employees’ severance benefits



    3,443


    3,256



    Deferred tax liabilities



    6


    136



    Total liabilities



    61,119


    41,050



    Shareholders’ equity


    Ordinary shares and additional paid-in capital



    63,412


    60,139


    Treasury shares



    (34,995)


    (24,807)


    Retained earnings



    130,046


    119,505



    Total shareholders’ equity



    158,463


    154,837



    Total liabilities and shareholders’ equity



    $



    219,582


    $


    195,887



    Silicom Ltd. Consolidated Statements of Operations


    (US$ thousands, except for share and per share data)



    Three-month period



    Twelve-month period



    ended December 31,



    ended December 31,



    2021


    2020



    2021


    2020


    Sales


    $



    36,303


    $


    33,898


    $



    128,460


    $


    107,398


    Cost of sales



    23,757


    24,289



    84,072


    73,632


    Gross profit



    12,546


    9,609



    44,388


    33,766


    Research and development expenses



    5,102


    5,396



    20,091


    17,244


    Selling and marketing expenses



    1,850


    1,608



    6,599


    6,209


    General and administrative expenses



    1,240


    1,106



    4,641


    4,065


    Total operating expenses



    8,192


    8,110



    31,331


    27,518


    Operating income



    4,354


    1,499



    13,057


    6,248


    Financial income (loss), net



    (556)


    (575)



    (152)


    1,034


    Income before income taxes



    3,798


    924



    12,905


    7,282


    Income taxes



    504


    78



    2,364


    1,557


    Net income


    $



    3,294


    $


    846


    $



    10,541


    $


    5,725


    Basic income per ordinary share (US$)


    $



    0.49


    $


    0.12


    $



    1.54


    $


    0.80


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



    6,732


    6,955



    6,826


    7,118


    Diluted income per ordinary share (US$)


    $



    0.48


    $


    0.12


    $



    1.51


    $


    0.80


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



    6,887


    7,013



    6,969


    7,157



    Silicom Ltd. Reconciliation of Non-GAAP Financial Results


    (US$ thousands, except for share and per share data)



    Three-month period



    Twelve-month period



    ended December 31,



    ended December 31,



    2021


    2020



    2021


    2020


    GAAP gross profit



    $



    12,546


    $


    9,609



    $



    44,388


    $


    33,766


    (1) Share-based compensation (*)



    121


    127



    479


    535


    (2) Impairment of intangible assets



    –


    1,657



    –


    1,657


    Non-GAAP gross profit



    $



    12,667


    $


    11,393



    $



    44,867


    $


    35,958


    GAAP operating income



    $



    4,354


    $


    1,499



    $



    13,057


    $


    6,248


    Gross profit adjustments



    121


    1,784



    479


    2,192


    (1) Share-based compensation (*)



    648


    633



    2,382


    2,176


    Non-GAAP operating income



    $



    5,123


    $


    3,916



    $



    15,918


    $


    10,616


    GAAP net income



    $



    3,294


    $


    846



    $



    10,541


    $


    5,725


    Operating income adjustments



    769


    2,417



    2,861


    4,368


    (3) Lease liabilities – financial expenses (income)



    363


    625



    321


    625


    (4) Taxes on amortization of acquired intangible assets



    67


    68



    267


    270


    Non-GAAP net income



    $



    4,493


    $


    3,956



    $



    13,990


    $


    10,988


    GAAP net income



    $



    3,294


    $


    846



    $



    10,541


    $


    5,725


    Adjustments for Non-GAAP Cost of sales



    121


    1,784



    479


    2,192


    Adjustments for Non-GAAP Research and development expenses



    275


    265



    1,011


    959


    Adjustments for Non-GAAP Selling and marketing expenses



    191


    186



    697


    602


    Adjustments for Non-GAAP General and administrative expenses



    182


    182



    674


    615


    Adjustments for Non-GAAP Financial income (loss), net



    363


    625



    321


    625


    Adjustments for Non-GAAP Income taxes



    67


    68



    267


    270


    Non-GAAP net income



    $



    4,493


    $


    3,956



    $



    13,990


    $


    10,988


    GAAP basic income per ordinary share (US$)



    $



    0.49


    $


    0.12



    $



    1.54


    $


    0.80


    (1) Share-based compensation (*)



    0.12


    0.11



    0.42


    0.38


    (2) Impairment of intangible assets



    –


    0.24



    –


    0.23


    (3) Lease liabilities – financial expenses (income)



    0.05


    0.09



    0.05


    0.09


    (4) Taxes on amortization of acquired intangible assets



    0.01


    0.01



    0.04


    0.04


    Non-GAAP basic income per ordinary share (US$)



    $



    0.67


    $


    0.57



    $



    2.05


    $


    1.54


    GAAP diluted income per ordinary share (US$)



    $



    0.48


    $


    0.12



    $



    1.51


    $


    0.80


    (1) Share-based compensation (*)



    0.11


    0.11



    0.41


    0.38


    (2) Impairment of intangible assets



    –


    0.23



    –


    0.23


    (3) Lease liabilities – financial expenses (income)



    0.05


    0.09



    0.05


    0.09


    (4) Taxes on amortization of acquired intangible assets



    0.01


    0.01



    0.04


    0.04


    Non-GAAP diluted income per ordinary share (US$)



    $



    0.65


    $


    0.56



    $



    2.01


    $


    1.54


    (*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

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    SOURCE Silicom Ltd.

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    January 27, 2022 – 5:15 AM PST