Silicom Ltd Net Income dropped on 32.6% while Revenue increased on 6.4%
01/31/2019 • About Silicom Ltd (
$SILC) • By InTwits
Silicom Ltd reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Silicom Ltd is a growth stock: 2018 revenue growth was 6.4%, 5 year revenue CAGR was 12.8% at 2018 ROIC 11.2%
- Silicom Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $1m in 2018, $2m in 2017, $1m in 2016, $3m in 2015, $2m in 2014
- The company has business model with average profitability: ROIC is 11.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Silicom Ltd's Revenue increased on 6.4%. Revenue growth showed acceleration in 18Q4 - it increased 20.5% YoY. During 2014-2018 Revenue growth topped in 2017 at 25.3%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.0 pp from 11.8% to 4.8% in FY2018.
Gross Margin decreased on 5.1 pp from 36.5% to 31.4% in 2018. Gross Margin stuck to a declining trend at -2.3 pp per annum in 2014-2018. SG&A as a % of Revenue decreased slightly on 1.0 pp from 8.9% to 7.9% in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 11.2% and was declining since that time.
Net Income margin decreased on 6.3 pp from 17.3% to 10.9% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 1.0%. Silicom Ltd's CAPEX/Revenue decreased on 2.6 pp from 3.6% in 2015 to 1.0% in 2018. It's average level of CAPEX/Revenue for the last three years was 1.3%. During the last 5 years CAPEX as a % of Revenue topped in 2015 at 3.6% and was declining since that time.
Return on investment
The company operates at low ROIC (11.2%) and ROE (9.8%). ROIC decreased on 8.4 pp from 19.6% to 11.2% in 2018. ROE decreased on 6.8 pp from 16.6% to 9.8% in 2018.
Leverage (Debt)
The company has no debt. Cash surged on 57.5%.
Valuation and dividends
Silicom Ltd's trades at EV/EBITDA 11.8x and P/E 18.0x.
Management team
Silicom Ltd's CEO is Yeshayahu Orbach "Shaike". Yeshayahu Orbach "Shaike" is a founder and has 18 years tenure with the company. Silicom Ltd's CFO is Eran Gilad. Eran Gilad has 14 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
Silicom Ltd ($SILC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 75.6 | 82.7 | 100.3 | 125.7 | 133.8 | 6.4% |
| Gross Profit | 30.8 | 34.1 | 38.6 | 45.9 | 42.1 | -8.4% |
| SG&A | 7.3 | 9.3 | 10.4 | 11.2 | 10.6 | -5.7% |
| EBITDA | 18.0 | 21.0 | 19.7 | 29.2 | 19.9 | -31.8% |
| Net Income | 14.6 | 16.5 | 13.1 | 21.7 | 14.6 | -32.6% |
Balance Sheet
|
|---|
| Cash | 17.9 | 18.2 | 11.9 | 17.0 | 26.8 | 57.5% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 1.9 | 3.0 | 1.4 | 1.7 | 1.3 | -20.4% |
Ratios
|
|---|
| Revenue growth | 3.2% | 9.4% | 21.3% | 25.3% | 6.4% | |
| EBITDA growth | -1.1% | 16.2% | -6.1% | 48.5% | -31.8% | |
|
|---|
| Gross Margin | 40.7% | 41.2% | 38.4% | 36.5% | 31.4% | -5.1% |
| EBITDA Margin | 23.9% | 25.3% | 19.6% | 23.3% | 14.9% | -8.3% |
| SG&A, % of revenue | 9.6% | 11.2% | 10.4% | 8.9% | 7.9% | -1.0% |
| Net Income Margin | 19.3% | 20.0% | 13.1% | 17.3% | 10.9% | -6.3% |
| CAPEX, % of revenue | 2.5% | 3.6% | 1.4% | 1.3% | 1.0% | -0.3% |
|
|---|
| ROIC | 17.8% | 17.1% | 13.6% | 19.6% | 11.2% | -8.4% |
| ROE | 15.3% | 15.5% | 11.2% | 16.6% | 9.8% | -6.8% |
| Net Debt/EBITDA | -1.0x | -0.9x | -0.6x | -0.6x | -1.3x | -0.8x |
Silicom Ltd ($SILC) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 30 | 28 | 31 | 46 | | 16.5% | -8.8% | -3.7% | 20.5% |
| Net Income | -1 | 2 | 4 | 10 | | -155.4% | -41.9% | -18.4% | -4.2% |
Balance Sheet
|
|---|
| Cash | 28 | 33 | 20 | 27 | | 31.9% | 89.0% | -30.9% | 57.5% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 15.4% | 32.2% | 33.8% | 39.8% | | -22.4% | -4.6% | -2.4% | 4.0% |
| Net Income Margin | -4.9% | 8.8% | 12.1% | 21.7% | | -15.1% | -5.0% | -2.2% | -5.6% |
Peers in Communications Equipment
Below we provide Silicom Ltd benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.1% | 2.8% |
|---|
| Silicom Ltd ($SILC) | | 9.4% | 21.3% | 25.3% | 6.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| Silicom Ltd ($SILC) | 40.7% | 41.2% | 38.4% | 36.5% | 31.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Silicom Ltd ($SILC) | 23.9% | 25.3% | 19.6% | 23.3% | 14.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 2.0% | 1.9% | 1.7% |
|---|
| Silicom Ltd ($SILC) | 2.5% | 3.6% | 1.4% | 1.3% | 1.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| Silicom Ltd ($SILC) | 17.8% | 17.1% | 13.6% | 19.6% | 11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.9x | -0.8x | 0.2x |
|---|
| Silicom Ltd ($SILC) | -1.0x | -0.9x | -0.6x | -0.6x | -1.3x |
