Silicom .(US:SILC)2024-04-30 12:32Financial Performance - Sales in 2023 decreased by 17.6% to US$ 124,131 thousand compared to US$ 150,582 thousand in 2022, primarily due to excess customer inventories and a global economic slowdown [222]. - Gross profit in 2023 was US$ 28,689 thousand, representing 23.1% of sales, down from 34.5% in 2022, attributed to a US$ 5.3 million impairment of intangible assets and changes in product mix [224]. - Net loss in 2023 was US$ 26,413 thousand, compared to net income of US$ 18,306 thousand in 2022, primarily due to impairments and decreased sales activity [240]. Expenses - Research and development expenses in 2023 increased by 0.4% to US$ 20,638 thousand, influenced by a decrease in capitalization of internal software development costs [226]. - Sales and marketing expenses in 2023 decreased by 0.8% to US$ 6,935 thousand, mainly due to currency fluctuations impacting expenses incurred in New Israeli Shekels and Danish Krone [229]. - General and administrative expenses in 2023 decreased by 5.5% to US$ 4,229 thousand, attributed to currency fluctuations and an increase in payroll-related expenses [231]. - An impairment charge of US$ 25,561 thousand was recorded for goodwill in 2023, compared to no impairment in 2022 [234]. - Financial income, net in 2023 amounted to US$ 1,372 thousand, down from US$ 2,464 thousand in 2022, influenced by currency fluctuations and changes in investment income [235]. - Current income tax expenses in 2023 were US$ 1,122 thousand, a decrease from US$ 2,963 thousand in 2022, mainly due to lower taxable income [237]. Cash Flow and Working Capital - Cash provided by operating activities in 2023 amounted to US$ 31,924 thousand, a significant increase from cash used in operating activities of US$ 4,090 thousand in 2022 [249]. - As of December 31, 2023, the company had working capital of US$ 122,251 thousand and a current ratio of 10.49 [245]. - Cash and cash equivalents increased by US$ 16,238 thousand to US$ 46,972 thousand compared to US$ 30,734 thousand as of December 31, 2022 [245]. - Trade receivables decreased to US$ 25,004 thousand as of December 31, 2023, down from US$ 27,258 thousand as of December 31, 2022, primarily due to decreased sales [246]. - Inventories decreased to US$ 51,507 thousand as of December 31, 2023, compared to US$ 87,985 thousand as of December 31, 2022, due to reduced inventory purchasing [248]. - The company has experienced a decrease in trade payables to US$ 4,139 thousand as of December 31, 2023, down from US$ 15,922 thousand as of December 31, 2022, due to reduced inventory purchases [247]. Investment and Funding - The company has received funding from the IIA amounting to approximately US$ 4,388,000 and has paid US$ 1,428,000 in royalties related to these grants [263]. - As of December 31, 2023, the investment portfolio consisted of approximately US$ 24.6 million invested in corporate and government debt securities, all classified as "held to maturity" and in fixed-rate instruments [541]. - The company was not required to adjust the carrying value of its investment securities, indicating stability in its investment portfolio [543]. Currency and Risk Management - The company does not currently engage in hedging to manage foreign currency exchange rate risks but may consider it in the future [243]. - The company is not engaged in any hedging or transactions to manage risks related to foreign currency exchange rate or interest rate fluctuations [550]. - The company does not have any short or long-term interest-bearing loans or debts, thus having no exposure to interest rate risk [543]. - A hypothetical 10% weakening of the U.S. Dollar relative to the NIS would have resulted in an increase in operating expenses of approximately US$ 1,876 thousand for the year ended December 31, 2023 [549]. - A hypothetical 10% weakening of the U.S. Dollar relative to the DKK would have resulted in an increase in operating expenses of approximately US$ 213 thousand for the year ended December 31, 2023 [549]. - In 2023, a 3.07% increase in the Dollar exchange rate to the NIS resulted in an aggregate decrease in the fair value of assets by US$ 289 thousand and liabilities by US$ 380 thousand [546]. - The company had accounts receivable in NIS amounting to US$ 6,264 thousand, with a potential decrease of US$ 569 thousand estimated from a hypothetical 10% increase in the year-end Dollar exchange rate [545]. - The company had accounts payable in NIS amounting to US$ 5,241 thousand, with a potential increase of US$ 582 thousand estimated from a hypothetical 10% decrease in the year-end Dollar exchange rate [545]. Strategic Focus - The company announced a 5-year plan focusing on Server Adapter and Edge solution portfolios while ceasing certain non-core product lines [276]. - The company expects to continue investing in research and development, with 120 employees engaged in these activities as of March 31, 2024 [264]. - The top three ultimate customers accounted for approximately 38% of revenues in 2023, indicating a concentration risk in customer base [552].