Silicom .(US:SILC)2021-10-28 18:41Financial Data and Key Metrics Changes - The company reported a 9% sequential growth and a year-over-year growth of 16% in revenues to $32.9 million for Q3 2021 [10] - Net income for the quarter was $3.6 million, an increase of 23% year-over-year, with earnings per share at $0.52, a 37% increase year-over-year [11][33] - Operating profit increased by 61% year-over-year, demonstrating strong operating leverage [11] - The company had over $66 million in net cash on the balance sheet at the end of the quarter [12][34] Business Line Data and Key Metrics Changes - The company experienced growing demand from both SD-WAN and 5G markets, with significant initial purchase orders from a major networking equipment provider [14][15] - The growth in the SD-WAN space has led to a steady stream of designs and new customer wins [16] - The company is optimistic about the O-RAN market, expecting significant growth contributions in the coming years [19] Market Data and Key Metrics Changes - Geographical revenue breakdown showed North America at 65%, Europe and Israel at 29%, and the Far East and rest of the world at 6% [29] - The top three customers accounted for about 35% of revenues over the last 12 months [29] Company Strategy and Development Direction - The company focuses on fast-growing networking market segments and continues to invest in R&D to provide timely products and solutions [13] - The strategy includes leveraging strong relationships with telcos and service providers to capitalize on the shift towards disaggregation and decoupling in network components [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing global shortage of electronic components, which is expected to intensify through 2022 [20][25] - Despite supply challenges, the company believes it can maintain high growth rates due to strong demand for its products [25] - For Q4 2021, the company expects revenues between $34 million and $36 million, representing approximately 18% growth over 2020 [26] Other Important Information - The company has executed a $15 million share buyback program, purchasing $3.2 million in shares during the quarter [12][34] - The gross profit for Q3 2021 was $11.3 million, with a gross margin of 34.3% [31] Q&A Session Summary Question: Impact of supply constraints on gross margins - Management indicated that the most serious impact of material shortages is on delivery ability rather than margins, as customers are generally willing to absorb cost increases [40] Question: Revenue impact from component availability - Management estimated that with 100% component availability, the revenue delta could be in the millions for the year [42] Question: Traditional business performance - Management confirmed an increase in orders from traditional customers, despite challenges in delivery due to material shortages [51] Question: Long-term revenue aspirations - Management acknowledged that the $250 million revenue goal could be conservative and may need to be updated based on current demand [66][70] Question: Status of the Intel partnership - The partnership with Intel remains strong, with ongoing collaboration in the 5G space [71] Question: FPGA design wins - Management noted that the FPGA sales cycle is longer, but there are ongoing proof of concept projects with major customers [72][75]