Silicom Reports Q2 2022 Financial Results

Rhea-AI Summary

Silicom Ltd. (NASDAQ: SILC) reported Q2 2022 revenues of $34.2 million, a 13% increase year-over-year. Non-GAAP EPS reached $0.70, up 61% from $0.42 in Q2 2021. For the first half of 2022, revenues totaled $66.2 million, marking a 12% growth. Despite strong financial performance, Silicom faces challenges due to the global components crisis, impacting delivery. The company expects Q3 2022 revenues between $38 million and $40 million, representing 18% year-over-year growth.

Positive

• Q2 2022 revenues increased to $34.2 million, a 13% rise from Q2 2021.
• Non-GAAP EPS for Q2 2022 surged to $0.70, a 61% increase over the previous year.
• First half 2022 revenues reached $66.2 million, a 12% growth compared to the same period last year.
• Strong demand for products led to a record backlog and significant design wins, including a $15 million order from a major SD-WAN vendor.

Negative

• Global components crisis continues to impact delivery capabilities.
• Supply chain challenges may affect revenue growth projections.

- Q2 Revenues Reach $34.2M with $0.70 Non-GAAP EPS –

KFAR SAVA, Israel, July 28, 2022 /PRNewswire/ -- Silicom Ltd. (NASDAQ: SILC), a leading provider of high-performance server/appliance networking solutions, today reported its financial results for the second quarter and six months ended June 30, 2022.

Financial Results

Second Quarter: Silicom's revenues for the second quarter of 2022 totalled $34.2 million, up 13% compared with $30.3 million for the second quarter of 2021.

On a GAAP basis, net income for the quarter totalled $4.5 million, or $0.67 per ordinary share ($0.68 per basic share), up 122% compared with $2.0 million, or $0.29 per ordinary share ($0.30 per basic share), for the second quarter of 2021.

On a non-GAAP basis (as described and reconciled below), net income for the quarter totalled $4.7 million, or $0.70 per diluted share ($0.71 per basic share), up 61% compared with $2.9 million, or $0.42 per diluted share ($0.43 per basic share), for the second quarter of 2021.

First Six Months: Silicom's revenues for the first half of 2022 totalled $66.2 million, up 12% compared with $59.3 million for the first half of 2021.

On a GAAP basis, net income for the period totalled $6.7 million, or $0.99 per diluted share ($1.00 per basic share), up 45% compared with $4.6 million, or $0.66 per diluted share ($0.67 per basic share) for the first half of 2021.

On a non-GAAP basis (as described and reconciled below), net income for the period totalled $7.7 million, or $1.14 per diluted share ($1.16 per basic share), up 31% compared with $5.9 million, or $0.84 per diluted share ($0.86 per basic share) for the first half of 2021.

Guidance

While multiple large design wins have given us an all-time-record backlog, our ability to deliver continues to be impacted by the global components crisis, which we expect to continue into 2023. We therefore project revenues for the third quarter of 2022 to range between $38 million and $40 million. The midpoint of this range represents 18% year-over-year revenue growth over the third quarter of 2021.

Comments of Management

Liron Eizenman, Silicom's President and CEO, commented, "The second quarter was a period of solid growth in revenues, margins and EPS, driven by stronger-than-ever demand for our products coupled with scrupulous attention to operational efficiency. Our revenue growth continues to reflect the accelerating transition of mainstream players – from industrials and online retail giants to telcos and service providers - to disaggregated/decoupled networks, driving demand for Silicom's must-have enabling solutions. It also reflects our success in maintaining a strong delivery rate in the face of the global shortages, primarily through determined product and operational innovation, and careful inventory management.

"The combination of spot-on products and ability-to-deliver continues to bring us more and larger design wins. For example, during the quarter, one of the SD-WAN market's largest vendors placed $15 million in orders for our SD-WAN Smart Platforms due for shipment in 2022, and guided us to expect annual orders above $25 million for the next several years. In parallel, discussions continue with a broad variety of telcos, networking equipment providers and partners regarding exciting new opportunities."

Mr. Eizenman concluded, "Looking forward, given the all-time-record level of our pipeline and our reputation as a 'can-deliver' provider despite challenges – all compounded by the speed with which our target markets are developing - we are well positioned for continued strong growth in the years ahead."

Conference Call Details
Silicom's Management will host an interactive conference today, July 28th, 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 https://www.silicom-usa.com/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, as well lease liabilities - financial expenses (income). 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: erang@silicom.co.il

Investor Relations Contact: Ehud Helft EK Global Investor Relations Tel: +1 212 378 8040 E-mail: silicom@ekgir.com

 

-- FINANCIAL TABLES FOLLOW –

Silicom Ltd. Consolidated Balance Sheets
(US$ thousands)
	June 30,			December 31,
	2022			2021
Assets
Current assets
Cash and cash equivalents	$	22,323		$	29,285
Marketable securities		4,794			8,266
Accounts receivables: Trade, net		31,914			31,120
Accounts receivables: Other		7,153			4,693
Inventories		107,883			75,753
Total current assets		174,067			149,117
Marketable securities		21,003			23,773
Assets held for employees' severance benefits		1,708			1,882
Deferred tax assets		1,382			1,616
Property, plant and equipment, net		4,333			4,576
Intangible assets, net		5,822			4,314
Right of Use		8,605			8,765
Goodwill		25,561			25,561
Total assets	$	242,481		$	219,604
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable	$	50,649		$	29,918
Other accounts payable and accrued expenses		15,644			18,582
Lease Liabilities		1,717			1,811
Total current liabilities		68,010			50,311
Lease Liabilities		6,373			7,377
Liability for employees' severance benefits		3,192			3,443
Deferred tax liabilities		42			10
Total liabilities		77,617			61,141
Shareholders' equity
Ordinary shares and additional paid-in capital		64,039			63,412
Treasury shares		(35,918)			(34,995)
Retained earnings		136,743			130,046
Total shareholders' equity		164,864			158,463
Total liabilities and shareholders' equity	$	242,481		$	219,604

 

 

 

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,
	2022			2021			2022			2021
Sales	$	34,154		$	30,277		$	66,224		$	59,279
Cost of sales		22,032			19,524			43,212			38,595
Gross profit		12,122			10,753			23,012			20,684
Research and development expenses		5,257			4,970			10,735			9,990
Selling and marketing expenses		1,599			1,614			3,382			3,169
General and administrative expenses		1,131			1,186			2,328			2,249
Total operating expenses		7,987			7,770			16,445			15,408
Operating income		4,135			2,983			6,567			5,276
Financial income (loss), net		1,159			(283)			1,500			534
Income before income taxes		5,294			2,700			8,067			5,810
Income taxes		770			666			1,370			1,181
Net income	$	4,524		$	2,034		$	6,697		$	4,629
Basic income per ordinary share (US$)	$	0.68		$	0.30		$	1.00		$	0.67
Weighted average number of ordinary shares used to compute basic income per share (in thousands)		6,666			6,868			6,674			6,889
Diluted income per ordinary share (US$)	$	0.67		$	0.29		$	0.99		$	0.66
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)		6,749			6,992			6,789			7,030

 

 

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,
	2022			2021			2022			2021
GAAP gross profit	$	12,122		$	10,753		$	23,012		$	20,684
(1) Share-based compensation (*)		173			91			334			238
Non-GAAP gross profit	$	12,295		$	10,844		$	23,346		$	20,922
GAAP operating income	$	4,135		$	2,983		$	6,567		$	5,276
Gross profit adjustments		173			91			334			238
(1) Share-based compensation (*)		683			508			1,468			1,085
Non-GAAP operating income	$	4,991		$	3,582		$	8,369		$	6,599
GAAP net income	$	4,524		$	2,034		$	6,697		$	4,629
Operating income adjustments		856			599			1,802			1,323
(2) Lease liabilities - financial expenses (income)		(734)			230			(920)			(174)
(3) Taxes on amortization of acquired intangible assets		67			67			135			133
Non-GAAP net income	$	4,713		$	2,930		$	7,714		$	5,911
GAAP net income	$	4,524		$	2,034		$	6,697		$	4,629
Adjustments for Non-GAAP Cost of sales		173			91			334			238
Adjustments for Non-GAAP Research and development expenses		373			195			748			461
Adjustments for Non-GAAP Selling and marketing expenses		163			158			371			315
Adjustments for Non-GAAP General and administrative expenses		147			155			349			309
Adjustments for Non-GAAP Financial income (loss), net		(734)			230			(920)			(174)
Adjustments for Non-GAAP Income taxes		67			67			135			133
Non-GAAP net income	$	4,713		$	2,930		$	7,714		$	5,911
GAAP basic income per ordinary share (US$)	$	0.68		$	0.30		$	1.00		$	0.67
(1) Share-based compensation (*)		0.13			0.09			0.27			0.19
(2) Lease liabilities - financial expenses (income)		(0.11)			0.03			(0.13)			(0.02)
(3) Taxes on amortization of acquired intangible assets		0.01			0.01			0.02			0.02
Non-GAAP basic income per ordinary share (US$)	$	0.71		$	0.43		$	1.16		$	0.86
GAAP diluted income per ordinary share (US$)	$	0.67		$	0.29		$	0.99		$	0.66
(1) Share-based compensation (*)		0.13			0.09			0.27			0.18
(2) Lease liabilities - financial expenses (income)		(0.11)			0.03			(0.14)			(0.02)
(3) Taxes on amortization of acquired intangible assets		0.01			0.01			0.02			0.02
Non-GAAP diluted income per ordinary share (US$)	$	0.70		$	0.42		$	1.14		$	0.84
(*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))

    

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SOURCE Silicom Ltd.

FAQ

What were Silicom's Q2 2022 revenues?

Silicom's Q2 2022 revenues totaled $34.2 million, a 13% increase from Q2 2021.

What is the non-GAAP EPS for Q2 2022 for SILC?

The non-GAAP EPS for Silicom in Q2 2022 was $0.70, up 61% compared to the same quarter in 2021.

What guidance has Silicom provided for Q3 2022?

Silicom projects Q3 2022 revenues between $38 million and $40 million, indicating 18% year-over-year growth.

How did Silicom perform in the first half of 2022?

For the first half of 2022, Silicom reported revenues of $66.2 million, a 12% increase compared to the same period in 2021.

What challenges is Silicom facing?

Silicom is facing challenges due to the global components crisis, which is impacting their delivery capabilities.