Silicom (NASDAQ: SILC) reported Q3 EPS of $0.41, $0.06 better than the analyst estimate of $0.35. Revenue for the quarter came in at $28.4 million versus the consensus estimate of $26.68 million.

Guidance for the Fourth Quarter

While remaining cautious due to the continued uncertainty of the market environment, improved visibility leads Management to project revenues of $30 to $31 million for the fourth quarter of 2020.

• Silicom's revenues for the third quarter of 2020 totalled $28.4 million, a sequential increase of 23% compared with $23.0 million for the second quarter of 2020 and an 18% increase compared with Q3 2019.
• On a non-GAAP basis (as described and reconciled below), net income for the quarter totalled $2.9 million, or $0.41 per share (basic and diluted), a 59% sequential increase compared with $1.8 million, or $0.26 per share (basic and diluted), for the second quarter of 2020, and up 15% compared with the third quarter of 2019.

Comments of Management

Shaike Orbach, Silicom's President and CEO, commented, "We are pleased to report strong results for the third quarter, with revenues above our original guidance and strong profits despite the Covid macro environment. This demonstrates the ongoing power of our business platform, including our significant SD-WAN design wins, partnerships with software vendors, collaboration with Intel and our extensive pipeline, to drive ongoing growth for our company."

Mr. Orbach continued, "Our success in the SD-WAN market has been driven by the disaggregation concept, which is based on the decoupling of hardware and software in a variety of deployment scenarios. Now that this concept has become a trend and extended to the Mobile world, it has created a strategic tangent market for us: disaggregation of the infrastructure of 4G and 5G mobile operators. As such, we are extremely excited by our first penetration into this new market - a Tier-1 mobile operator's selection of our architecture for next-generation Distribution Units (DUs) to use in its field trials of a network with decoupled software and hardware components. These DUs will take advantage of the full range of our related expertise, including in x86, Time Synchronization, Offload Acceleration and FPGAs.

"This win demonstrates our unique ability to provide integrated solutions for this complex market, thereby opening the door to huge parallel opportunities. In fact, we have already been approached for discovery discussions with many of the world's major telcos and independent software manufacturers, as well as server manufacturers exploring the potential of integrating our acceleration and time synchronization cards into their new disaggregated products."

Mr. Orbach concluded, "While sales processes in this world are very long, given the current level of interest, trials, evaluation POs and other dynamics, we believe it is just a matter of time until this Mobile market becomes a highly significant new growth driver for Silicom. We are investing heavily and feel confident that substantial rewards will follow."

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