Silicom Reports Q1 2018 Financial Results

Comments of Management

Mr. Shaike Orbach, Silicom's President and CEO, commented, "During the first quarter, we were disappointed that our top-10 Cloud client aborted the massive program that promised to be such a large revenue generator for us. While this reality presents us with short-term operational and growth-related challenges, our growth strategy remains intact. This is well demonstrated by the major win that we announced today with a Tier 1 US telco. We believe that this strategy will continue to generate more design wins and lead to new engagements which, over time, will compensate for the loss of the Cloud deal."

Mr. Orbach continued, "In fact, we are very excited by this new SD-WAN-related win, which, together with other important new developments, demonstrates the fundamental resilience of our growth model. In addition to this new win, during the quarter, we also achieved a new Cyber Security Design Win, another major NFV-related Virtual CPE (vCPE) Design Win from another major telco is around the corner and additional similar opportunities are accumulating. Since each of these telco-related deals is expected to ramp to tens of millions of dollars per year, winning any combination will have a significant positive impact on our revenues and profits. The response that we are receiving from these global giants confirms that they view us as a strategic 'performance partner' that brings the products, development capabilities and support they need to cope with today's challenging high-speed, high-volume, connectivity demands."

Mr. Orbach concluded, "Our sales generation engine is running smoothly and our pipeline is becoming deeper and longer by the day. With a winning value proposition, major new wins expected for both the near-term and the long-term and endless opportunities, we expect to return to strong growth once the new wins that we project outpace the cancelled Cloud deal."

Conference Call Details

Silicom's Management will host an interactive conference today, April 30^th, at 9am Eastern Time (6am Pacific Time, 4pm Israel Time) to review and discuss the results.

To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, try the international dial-in number.

US: +1-888-668-9141
UK: 0-800-917-5108
ISRAEL: 03-918-0609
INTERNATIONAL: +972-3-918-0609

At: 9:00am Eastern Time, 6:00am Pacific Time, 4:00pm Israel Time

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 investor relations 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, acquisition-related expenses, adjustment of inventory step up related to acquisition, amortization of acquired intangible assets, changes in the fair value of contingent consideration from a business combination, as well as taxes on amortization of acquired 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 150 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 market, the speed and extent to which cloud-based and cloud-focused solutions are adopted by the market, likelihood that it will rely increasingly on customers which provide cloud-based and cloud-focused solutions in this evolving market, 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 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.

-- FINANCIAL TABLES FOLLOW –

Silicom Ltd. Consolidated Balance Sheets
(US$ thousands)
	March 31,			December 31,
	2018			2017
Assets
Current assets
Cash and cash equivalents	$	28,465		$	17,021
Marketable securities		-			7,752
Accounts receivables: Trade, net		37,376			41,367
Accounts receivables: Other		4,198			5,823
Inventories		49,502			51,487
Total current assets		119,541			123,450
Marketable securities		12,037			5,945
Assets held for employees' severance benefits		1,570			1,591
Deferred tax assets		950			899
Property, plant and equipment, net		3,697			4,121
Intangible assets, net		906			1,047
Goodwill		25,561			25,561
Total assets	$	164,262		$	162,614
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable	$	15,293		$	12,629
Other accounts payable and accrued expenses		6,428			6,420
Total current liabilities		21,721			19,049
Liability for employees' severance benefits		2,702			2,765
Total liabilities		24,423			21,814
Shareholders' equity
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