Record Quarter and Year for Silicom!
Ken Nagy, CFA
On January 23, 2012, Silicom Ltd, (SILC) the provider of high-performance server and appliances networking solutions, reported financial results for its fiscal 2011 fourth quarter and full year, ended December 31, 2011.
A solid fourth quarter by the Company resulted in record quarterly and year end revenues, operating income, net income and earnings per share.
The strong results include the doubling of revenues and tripling of net income over the past two years, which was primarily driven by growth of sales for both established and new product lines as well as increasingly diversified sales across the Company’s entire product line.
Silicom’s fourth quarter revenues increased over 12 percent year over year to a record $11.080 million, which compares to revenues of $9.880 million for the three months ended December 31, 2010.
Operating income for the fourth quarter increased over 27 percent, reaching the Company’s highest ever $2.469 million, mainly as a result of the revenue highs, improved gross margin and lower total operating expenses as a percentage of revenues.
Gross margin for the three months ended December 31, 2011 improved to 42.5 percent compared to 40.7 percent for the fourth quarter, ended December 31, 2010.
Although total operating expenses increased year over year by $161,000, as a percent of revenues, they fell to 20.2 from 21.1 percent during the fourth quarter of 2010.
The Company’s fourth quarter net income on a GAAP basis increased by nearly 23 percent or $446,000 to $2.400 million from net income of $1.954 million for the comparable quarter of 2010.
Here again, the increase in net income was a result of record revenues and improved margins.
Based on the weighted average number of ordinary common shares of 6.917 million shares, basic net income per share for the fourth quarter resulted in net income of $0.35 per ordinary share during the fourth quarter of fiscal 2011. This compared to a basic net income per share of $0.29 on a weighted average number of ordinary shares of 6.853 million shares during the three months ended December 31, 2010.
For the year ended December 31, 2011, year over year revenues improved by over 30 percent to a best ever $39.633 million while net income on a GAAP basis increased over 44 percent or $2.528 million to $8.243 million.
Here again, the increase in revenues was primarily driven by growth of sales for both established and new product lines as well as increasingly diversified sales across the Company’s entire product line.
Similarly, the increase in net income was a result of record revenues, lower total operating expenses as a percent of revenues and improved margins.
Gross margin for the year improved to 43.4 percent compared to gross margin of 42.5 percent for the fiscal ended December 31, 2010 while total operating expenses fell to 22 percent of total revenues from 23.1 percent of revenues during fiscal 2010.
Based on the weighted average number of ordinary common shares of 6.896 million shares, ordinary net income per share resulted in net income of $1.20 per ordinary share during the fiscal year ended December 31, 2011. This compared to an ordinary net income per share of $0.84 on a weighted average number of ordinary shares of 6.821 million shares during the fiscal year ended December 31, 2010.
Silicom’s cash, cash equivalents, bank deposits and marketable securities totaled $49.2 million, or $7.10 per ordinary share. This is an improvement from $47.4 million, or $6.87 per outstanding share as of September 30, 2011, and a year over year increase of $3.7 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.
Silicom continues to add new names to its list of over 75 loyal and stable OEM customers.
The Company expects to sustain its diversification of revenue sources into 2012 and believes that the fundamentals of its industry remain very strong.
Silicom anticipates continued stronger growth than its target markets in 2012 and beyond as a result of the rapid development of the server and network appliance sectors being driven by cloud computing and virtualization and its components being viewed as reliable, differentiated performance enhancers.
Furthermore, Silicom believes that it is favorably positioned to continue growing rapidly in 2012 and beyond as a result of its ahead-of-plan growth for its strategic SETAC product lines, positioning the Company to enter even more deeply into the network appliance space.
The Company has 10 to 15 current SETAC customers and stated that it has approximately the same amount in its pipeline.
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.
Here again, given that the Company’s products are core and critical building blocks for next generation servers and appliances, it is very possible to expect to see continued strong demand with the selling of a broader range of products to a larger number of customers resulting in Silicom’s sales exceeding the growth rate of the Company’s end market.
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