Silicom Reports 2023 Results & Announces Strategic 5-Year Plan
Key elements of the plan: focus on core businesses, expense reductions and an aggressive share buyback aimed at raising EPS gradually to $3+ in 2028
KFAR SAVA, Israel, Feb. 1, 2024 /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, 2023, together with a 5-Year Strategic Plan recently approved by its Board of Directors.
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5-Year Strategic Plan
The main objective of the 5-Year Strategic Plan is to create significant shareholder value over time, increasing Earnings Per Share (EPS) gradually to above $3 in 2028. The primary elements of the plan include an increased focus on the company's core Server Adapter and Edge solution portfolios, for which there is robust fundamental demand, together with significant reductions in workforce and other expenses. To date, implementation of the plan has resulted in the discontinuation of two non-core programs and a downsizing of Silicom's workforce from 310 to 240 employees. Associated one-time impairment of intangible assets and related write-offs of Cost of Sales have been reflected in the Company's fourth quarter GAAP financial results, with reconciliation detailed in the Non-GAAP financial results.
The starting point for the plan is the company's extremely strong balance sheet, which, as of year-end, included working capital and marketable securities totalling $140 million ($71 million in cash, $18 million in Accounts Receivable net of Accounts Payable, and $51 million in high-quality inventory), or approximately $21 per share. Based on this balance sheet strength, the company currently plans to continue with an aggressive share buyback in 2024 and 2025, repurchasing a total of approximately 1.6 million shares during the next two years. The timing and amount of the repurchases will be subject to business and market conditions, corporate and regulatory requirements, share price, acquisition opportunities and other factors.
Financial Results
Full Year: Silicom's revenues for 2023 totalled $124.1 million compared with $150.6 million for 2022.
On a GAAP basis, reflecting the one-time write-offs described above, the company posted a net loss of $(3.0) million, or $(0.44) per ordinary share (basic and diluted) for the year, compared with net income of $18.3 million, or $2.69 per diluted share ($2.73 per basic share), for 2022.
On a non-GAAP basis (as described and reconciled below), net income for the year totalled $10.2 million, or $1.52 per ordinary share (basic and diluted), compared with $21.2 million, or $3.12 per diluted share ($3.17 per basic share), for 2022.
Fourth Quarter: Silicom's revenues for the fourth quarter of 2023 totalled $18.8 million compared with $45.2 million for the fourth quarter of 2022.
On a GAAP basis, reflecting the one-time write-offs described above, the company posted a net loss of $(11.5) million, or $(1.76) per ordinary share (basic and diluted), compared with net income of $5.6 million, or $0.82 per diluted share ($0.84 per basic share) for the fourth quarter of 2022.
On a non-GAAP basis (as described and reconciled below), net loss for the quarter totalled $(0.5) million, or $(0.07) per ordinary share (basic and diluted), compared with net income of $6.6 million, or $0.98 per diluted share ($0.99 per basic share) for the fourth quarter of 2022.
Comments of Management
Liron Eizenman, Silicom's President and CEO, commented, "We are facing a tough transition period fueled by macro-economic headwinds and customer drawdowns of stockpiled inventories. We believe that our 5-Year Strategic Plan will allow us to return Silicom to gradual and steady growth of our revenues and EPS, creating significant value for our shareholders even in times of market volatility. The main elements of the plan include increased investment in our focus areas, discontinuation of non-core programs, a significant scale-back of our expenses and an aggressive share buyback. We believe these activities will raise our EPS gradually to above $3 in 2028."
Mr. Eizenman continued, "We expect our revenue growth from 2025 and beyond to be driven by the ramp-up of already-achieved, long-term SD-WAN and SASE design wins, from the sale of additional Edge systems to telcos and service providers, and from our 'fat' existing pipeline of potential server adapter and Edge product design wins with leading networking, security, and service providers. We believe this will enable us to achieve 20% compound average annual growth from 2024 as a baseline. With full dedication and buy-in from our highly experienced management team and staff, we are moving forward according to plan and will report our progress over the coming quarters."
Conference Call Details
Silicom's Management will host an interactive conference today, February 1(st), 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 (the "SEC") 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, impairment of intangible assets and related write-offs, as well as 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 (loss), net income (loss) 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, the speed and extent to which Silicom's solutions are adopted by the relevant markets, difficulty in commercializing and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property, competition, disruptions to its manufacturing, sales & marketing, development and customer support activities, the impact of the wars in Gaza and in the Ukraine, attacks on shipping by Huthis in the Red Sea, rising inflation, rising interest rates and volatile exchange rates, as well as any continuing or new effects resulting from the COVID-19 pandemic, and the global economic uncertainty, which may impact customer demand by encouraging them to exercise greater caution and selectivity with their short-term IT investment plans. The factors noted above are not exhaustive.
Further information about the company's businesses, including information about factors that could materially affect Silicom's results of operations and financial condition, are discussed in our Annual Report on Form 20-F and other documents filed by the Company and that may be subsequently filed by the company from time to time with the SEC. These forward-looking statements can generally be identified as such because the context of the statement will include words such as "expect," "should," "believe," "anticipate" 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: Investor Relations Contact: Eran Gilad, CFO Ehud Helft Silicom Ltd. EK Global Investor Relations Tel: +972-9-764-4555 Tel: +1 212 378 8040 E-mail: erang@silicom.co.il E-mail: silicom@ekgir.com ---
Silicom Ltd. Consolidated Balance Sheets (US$ thousands) December 31, December 31, 2023 2022 Assets Current assets Cash and cash equivalents $ 46,972 $ 30,734 Marketable securities 7,957 4,020 Accounts receivables: Trade, net 25,004 27,258 Accounts receivables: Other 3,688 3,620 Inventories 51,507 87,985 Total current assets 135,128 153,617 Marketable securities 16,619 15,163 Assets held for employees' severance benefits 1,357 1,715 Deferred tax assets 256 502 Property, plant and equipment, net 3,552 4,488 Intangible assets, net 2,253 6,710 Right of Use 6,466 8,441 Goodwill 25,561 25,561 Total assets $ 191,192 $ 216,197 Liabilities and shareholders' equity Current liabilities Trade accounts payable $ 4,139 $ 15,922 Other accounts payable and accrued expenses 6,668 9,641 Lease Liabilities 2,070 1,549 Total current liabilities 12,877 27,112 Lease Liabilities 3,877 6,291 Liability for employees' severance benefits 2,672 3,425 Deferred tax liabilities 46 74 Total liabilities 19,472 36,902 Shareholders' equity Ordinary shares and additional paid-in capital 70,693 66,578 Treasury shares (43,631) (34,896) Retained earnings 144,658 147,613 Total shareholders' equity 171,720 179,295 Total liabilities and shareholders' equity $ 191,192 $ 216,197
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, 2023 2022 2023 2022 Sales $ 18,763 $ 45,193 $ 124,131 $ 150,582 Cost of sales 23,257 30,204 95,442 98,626 Gross profit (loss) (4,494) 14,989 28,689 51,956 Research and development expenses 5,016 5,076 20,638 20,563 Selling and marketing expenses 1,592 1,809 6,935 6,990 General and administrative expenses 1,024 1,042 4,229 4,477 Total operating expenses 7,632 7,927 31,802 32,030 Operating income (loss) (12,126) 7,062 (3,113) 19,926 Financial income (expenses), net 171 439 1,372 2,464 Income (loss) before income taxes (11,955) 7,501 (1,741) 22,390 Income taxes (446) 1,880 1,214 4,084 Net income (loss) $ (11,509) $ 5,621 $ (2,955) $ 18,306 Basic income (loss) per ordinary share (US$) $ (1.76) $ 0.84 $ (0.44) $ 2.73 Weighted average number of ordinary shares used to 6,537 6,727 6,700 6,697 compute basic income (loss) per share (in thousands) Diluted income (loss) per ordinary share (US$) $ (1.76) $ 0.82 $ (0.44) $ 2.69 Weighted average number of ordinary shares used to 6,544 6,817 6,742 6,796 compute diluted income (loss) per share (in thousands)
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, 2023 2022 2023 2022 GAAP gross profit (loss) $ (4,494) $ 14,989 $ 28,689 $ 51,956 (1) Share-based compensation (*) 105 159 428 638 (2) Impairment of intangible assets and related write-offs 9,647 9,647 Non-GAAP gross profit $ 5,258 $ 15,148 $ 38,764 $ 52,594 GAAP operating income (loss) $ (12,126) $ 7,062 $ (3,113) $ 19,926 Gross profit adjustments 9,752 159 10,075 638 (1) Share-based compensation (*) 834 714 2,925 2,938 Non-GAAP operating income (loss) $ (1,540) $ 7,935 $ 9,887 $ 23,502 GAAP net income (loss) $ (11,509) $ 5,621 $ (2,955) $ 18,306 Operating income (loss) adjustments 10,586 873 13,000 3,576 (3) Lease liabilities - financial expenses (income) 368 85 (99) (930) (4) Taxes on amortization of acquired intangible assets 68 68 271 271 Non-GAAP net income (loss) $ (487) $ 6,647 $ 10,217 $ 21,223 GAAP net income (loss) $ (11,509) $ 5,621 $ (2,955) $ 18,306 Adjustments for Non-GAAP Cost of sales 9,752 159 10,075 638 Adjustments for Non-GAAP Research and development expenses 413 362 1,423 1,454 Adjustments for Non-GAAP Selling and marketing expenses 199 200 747 774 Adjustments for Non-GAAP General and administrative expenses 222 152 755 710 Adjustments for Non-GAAP Financial income (loss), net 368 85 (99) (930) Adjustments for Non-GAAP Income taxes 68 68 271 271 Non-GAAP net income (loss) $ (487) $ 6,647 $ 10,217 $ 21,223 GAAP basic income (loss) per ordinary share (US$) $ (1.76) $ 0.84 $ (0.44) $ 2.73 (1) Share-based compensation (*) 0.14 0.13 0.50 0.53 (2) Impairment of intangible assets and related write-offs 1.48 1.43 (3) Lease liabilities - financial expenses (income) 0.06 0.01 (0.01) (0.13) (4) Taxes on amortization of acquired intangible assets 0.01 0.01 0.04 0.04 Non-GAAP basic income (loss) per ordinary share (US$) $ (0.07) $ 0.99 $ 1.52 $ 3.17 GAAP diluted income (loss) per ordinary share (US$) $ (1.76) $ 0.82 $ (0.44) $ 2.69 (1) Share-based compensation (*) 0.14 0.14 0.50 0.53 (2) Impairment of intangible assets and related write-offs 1.48 1.43 (3) Lease liabilities - financial expenses (income) 0.06 0.01 (0.01) (0.14) (4) Taxes on amortization of acquired intangible assets 0.01 0.01 0.04 0.04 Non-GAAP diluted income (loss) per ordinary share (US$) $ (0.07) $ 0.98 $ 1.52 $ 3.12 (*) Adjustments related to share-based compensation expenses according to ASC topic 718 (SFAS 123 (R))
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SOURCE Silicom Ltd.