Ladies and gentlemen, thanks you for standing by. Welcome to the Silicom Fourth Quarter and Full Year 2014 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Silicom's Investor Relations team at GK Investor Relations or view it in the News section of the company's website, www.silicom-usa.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin, please?

Thank you, operator. Good day to everybody. I would like to welcome all of you to Silicom's fourth quarter and full year 2014 results conference call. Before we start, I'd like to draw your attention to the following Safe Harbor statement. This conference call contains projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and may change as time passes. Silicom does not assume any obligation to update their information. Actual events or results may differ materially from those projected including as a results of changing industry and market trends, reduced demand for Silicom's products, the timing and development of new products, and the adoption by the market, increased competition in the industry, and product reductions as well as due to risks identified and document filed by the company with the SEC. In addition, following the company's disclosure of certain non-GAAP financial measures in today's earnings release, such non-GAAP financial measures will be discussed during this call. Such non-GAAP measures are used by the management to make strategic decisions focused future results and evaluate the company's current performance. Management believes that the presentation of these non-GAAP financial measures is useful to investors understanding and assessment of the company's ongoing corporation and prospects for the future. Unless otherwise stated, it should be assumed that financials discussed in this conference call will be on a non-GAAP basis. Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing our financial conditions and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non-GAAP to GAAP financial measures is included in today's earnings release, which can find on Silicom's website. With us on the line today are Mr. Shaike Orbach, the CEO; and Mr. Eran Gilad, the CFO. Shaike will begin with an overview of the results, followed by Eran who will provide the analysis of the financials, we will then turn over the call to the question-and-answer session. And with that, I would like now to hand over the call to Shaike. Shaike, please?

Thank you, Ehud. Good morning, everyone, and welcome to our fourth quarter and full year 2014 results conference call. We are particularly pleased with our results with 2014 being a year with record revenues and record operating profit. In addition, our fourth quarter results demonstrates that we are now back on track to the path of growth and the temporary weakness we experienced in mid-2014 is well and truly behind us. As we shared with you last quarter, we expected our third quarter revenue to be the lowest for the year resuming growth into fourth quarter. Our 44% sequential growth to revenues of $22.8 million demonstrate that this was indeed the case. We are also very pleased with the strong non-GAAP operating profit of $6.2 million we’ve reported in the quarter. This represents an impressive operating margin of 27% a level which we are very happy with. Looking ahead, we continue to believe that 2015 as a whole will be significantly better than 2014. And as we move forward, the specific negative factors which affected us in 2014 will eventually become mitigated or overwritten by our natural growth. We also expect to continue to grow ahead forward and end markets. I will discuss this specific financial guidance for 2015 in a few minutes. In terms of our balance sheet strength, our cash levels remain strong, growing to $57.4 million at the end of the yeah with no debt versus $55.2 million at the end of last year. More impressive is that we maintain this strong cash level throughout 2014, despite paying our shareholder a dividend of $7.2 million and paying out approximately $10 million for the acquisition of Fiberblaze. This was due to our strong positive cash flow throughout 2014 generating over $18 million from operations. Our strong cash level…

Thank you, Shaike, and hello everyone. Revenue for the fourth quarter of 2014 was $22.8 million. The revenue for the full year of 2014 was a record $75.6 million. Our geographical revenue breakdowns for 2014 were as follows; North America 71%, Europe and Israel 16%, Far East and the rest of the world 14%. I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the non-cash compensation expenses in respect of options and granted to directors, officers and employees and acquisition related adjustments. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the fourth quarter of 2014 was $9.5 million, representing a gross margin of 42.6%. This is compared with $10.1 million of gross margin or 39.9% in the fourth quarter of last year. The gross margin does vary between quarters, mainly as a result of the specific mix of products sold during the quarter. For 2014 as a whole, gross profit was $31 million, representing a gross margin of 40.9% versus $29.5 million, representing a gross margin of 40.3% in 2014. Operating expenses in the fourth quarter of 2014 were $3.3 million or 14.5% of revenues compared with $3.2 million or 12.7% of revenues in the fourth quarter of last year. In 2014, our operating expenses were $12.2 million or 16.2% of revenues compared with $11.3 million in 2014 or 15.4% of revenues. Operating income for the fourth quarter of 2014 was $6.2 million or 27% of revenues compared to $6.9 million or 27.2% of revenue as reported in the fourth quarter of 2014. For the year, operating income was a record $18.7 million or 24.8% of revenues compared with $18.3 million in 2014 or 24% of revenues. Fourth quarter 2014 net income was $5.4 million or 23.8% of revenue compared to $6.8 million or 27% of revenue in the fourth of last year. Full year 2014 net income was $16.3 million or 21.5% of revenues versus $17.8 million or 24.2% of revenue last year. Earnings per diluted share in the quarter were $0.74 compared with $0.94 in the fourth quarter year. Earnings per diluted share for 2014 were $2.22 versus $2.45 in 2015. Now turning to the balance sheet, as of December 31st 2014, the company’s cash, cash equivalents, short term bank deposits and marketable securities totaled $57.4 million or $7.95 per outstanding share. That ends my summary and we would be happy to take any questions. Operator?

Thank you. [Operator Instructions] The first question is from Alex Henderson of Needham & Company. Please go ahead.

Hey guys.

Hi.

Congratulations on a good quarter. Couple of questions, first you know we’ve got a gross margin at 41.6 in the quarter which is well above, I think your target range is more like 40 and a couple of tens. Is it reasonable to think that we should be trending back towards that 40% definite over the coming year, I think it’s kind of policy, isn’t it?

No, it’s not a policy; it’s what we see as being something which is reasonable and happening. But this - I mean the actually gross margin is mostly a result of the mix in products that we sell because not all product that we’re selling have the same kind of GP with themselves. So it’s up to the mix and what we’re saying is that typically it’s around 40, but it’s not a policy to keep it 40. We would be happy if it’s more than 40. What we’re saying is that based on the historical quarters that we had and the kind of the products that we selling and the mix that we’re seeing, it would be reasonable to assume around 40 or 40 point something but it’s not a policy. So it could be somewhat higher in one or two quarter and then going to back to and even to the other side as well in one or another. It’s result of the mix of products.

Okay, so what specific area - product areas should we be watching that are tend to have a little margin than the average you know that’s causing the mix shift to higher gross margin?

I would say ones again in general that products with the complicated fiber devices inside them are typically creating higher margins, even that is not only true because there are some fiber products which are low end, which are not seeing with high margins. But in general I would say that complicated products are being sold is higher margins. It’s - again it’s not always the case because sometimes depending on the customer and depending on the quantities, we would sell a more complicated product in a lower price. But in general - and fiber is just an example complicated products then to create a higher level of GP.

Alright, so the other question on the trajectory, you guys have kind of a history of spiking up in the fourth quarter and then coming down pretty substantially to 1Q which makes forecasting extremely difficult. And I guess the question is should we be anticipating that substantial decline again in the 1Q is as this typically the case after the strong quarter?

Well I think that Q1 would be lower than Q4 for sure. And if you take our guidance and then because indeed I mean nothing about this year because 2014 has been a special year because during the year we have seen some sort of a decline and then as I’ve said before only in that quarter in Q4, we resumed growing. And by then previous year, you could that actually we grew from one quarter to the other and while not saying but this necessarily be the case moving forward but I think that this could be the very first for modeling if you want. So that in the first quarter of the year, seems or always in the regular year is the lowest and then we go up and up with the fourth quarter being always the best. So now that you have our guidance I think that could be helpful in modeling what - the quarter by quarter revenues.

Great, can you give us any sense on the OpEx expenditure growth rate of the year planning on this year; I assume its low single digit kind of growth. Is that accurate?

We do not provide the number but we’re not planning on any dramatic changes in the OpEx. That being said, there is more than a usual increasing to OpEx due to the acquisition of Fiberblaze, which have their own OpEx of course which is included in ours as well. But even that would not make the overall change dramatic.

So just on Fiberblaze gross margins and OpEx number roughly speaking for that we should be considering to revolve into the numbers?

We do not give the numbers for Fiberblaze especially because we believe that the level of synergy between Fiberblaze and Silicom is such that pretty soon we will really become a single company. As I said I mean their sales are combined with ours and vice versa. We’re doing things together already and we’re just about - just a little bit more than one month from the acquisition itself. So you wouldn’t be able to separate it and say this is theirs, this is ours.

Alright, okay, thanks.

The next question is from [indiscernible] of HC Wainwright. Please go ahead.

Thank you. Congratulations guys on a really nice bounce back and dragging towards the growth again. On the design win side you know the design win you have today, are these resulting in potentially bigger order sizes for you than previously or historical order sizes?

Now, I don’t think that the size of the orders overall will grow, but the Switched SETAC design win that we have announced is a design win for products which are more expensive. So ones if we are able to - if the percentage of Switched SETAC design wins that you we’re having is going to grow and the revenues for this is going to grow above just the $2 million and the $1 million that we expect from the current two design wins. So that’s going to be more important than it would have an impact on the ASP in a way including because these products are expensive. But also means that quantities would be lower. I mean if we - if those across that we are getting order sometime for 5,000 cards one order I do not expect of course I would not - I don’t have anything against it but I do not expect any one ordering 5,000 Switched SETAC creates the solution. So the size of the orders I think will be the same which is lighter size of the design wins is a natural size for us, but it may have an impact over the ASP.

Okay, got it. And you know on the Fiberblaze side, did that come with its own sales force or is it you know your people who are going to be out there pushing their product, could you give us color on what the marketing and sales are?

Yeah, I mean so Fiberblaze does have a minimal sales force I would say, but we definitely believe that now that Silicom is going to push Fiberblaze product as well that will an impact and that’s why we believe it’s a good combination of us working together. So they do have - they do have some sales and they do have some sales, a small sales of innovation but I think that now that we are pushing their products, it’s going to be much more significant.

I got it. Any changes to your tax rate expectation for 2015?

I hear the question. No tax change is expected as we could not see - as we could all see the tax rate in 2014 was approximately 14% and we expect the same level of 14% to 15% in 2015.

Got it. Thanks.

[Operator Instructions] The next question is from Don McKiernan of Landolt Securities. Please go ahead.

Yeah, thank you and congratulations to a strong finish ’14 and great work in ’15. I have three questions, one with Intel Coleto Creek, I believe there is only one design win announced so far, so an update on that. And then also an update on the timestamp product, any progress there? And then I’ll come back with the third question.

Okay, so with respect to Coleto Creek, I believe that we have another small design win that we didn’t announce anything above that but it’s relative small. On the other side, I think that Coleto Creek is gaining a lot of progress and we have more and pipeline is longer and always becoming thicker as well. So I believe this definitely is going to be important throughout the year in terms of design wins, in terms of revenues as well. But looking forward beyond 2015, I think it will be even more significant because we see a lot of traction in that area. Intel supports us, so I believe in that very much. With the respect to the timestamp, so we’re still expecting a major maybe even two design wins to happen relatively soon. This is taking more time than what we thought, always no issues of coming whether they are related to the card or to the customer plans in general, but we’re still optimistic just like we were even though it’s being delight and it is being delight, I mean way - I must say that I thought when we talk last time or even before that, that by now we would have at least one of these two major design wins, we still don’t have it. But it’s moving forward but slowly than what I thought.

And then is that the pipeline of prospects for both about where it was three months ago or is it being growing in terms of potential customers?

For Coleto Creek, it is growing, for timestamp, I believe it’s also growing, but it is not growing by a very I would say significant potential deals from the last time that we talked. We have any major potential issue or potential account that was added June the last three months but we do have several big potential accounts which are within the pipeline. And I am hoping - I am still hopping they will happen pretty soon.

Okay, the last question, the headcount at Fiberblaze is that something if you could give us the number of new employees that you had?

I believe it’s about 20.

20, 20 something.

Alright, thank you and good luck.

Thank you.

The next question is from Ronald Mullins of Segmark. Please go ahead.

And so I have a couple of questions. One is on Fiberblaze, what were the fees another cause of the acquisition and with your own expense I supposed they would be in 2014?

Can you repeat the question, we didn’t hear you.

For the acquisition of Fiberblaze, what were the fees another cause of making that acquisition? Imagine you had outside lawyers and others helping you on this.

The fees, okay, we heard - we thought we heard another word. The stock of fees related to the acquisition first of all can be seen on the non-GAAP reconciliation page on the - on the last page of the press release, the amount - the total amount was approximately 2,000 - $200,000.

Okay, and the other question is, when you combining your technology with the Fiberblaze technology and making new, how long do you expect would be the - we would see sales on that?

Well it I would say that it depends because there are several levels to that. I mean I think that Fiberblaze technology could complement ours and ours can complement theirs. Even within a few months when we are talking about I would say low level of complementary features et cetera that are were there - I would say it’s a new product development but rather taking something from them and adding to our products and vice versa and this could be something that will be introduced this year I believe and we may even these - be able to see some revenues this year. Of course we may also design new products on stretch that could take longer. These products would not be introduced this year or at vast by the end of the year and therefore revenues would be later on. But I think that - I feel it’s a little bit difficult to me to explain how really is - I feel that this deal is for us. We are already working together, planning together and not only at the management level but rather at the technical level, so we really do see immediate areas where we can help each other for the technology perspective and obviously as I mentioned before from a marketing and sales perspective.

Thank you.

The question is from Alex Henderson of Needham & Company. Please go ahead.

Yeah, hey, just one other thing the OpEx lines, can you give us the three non-GAAP numbers there since the press release doesn’t actually provide the breakout of OpEx costs between R&D, sales and marketing and G&A. What were the non-GAAP numbers for those three items?

What you were saying was right. I feel this quarter - as of this quarter, we have a specific tables which can be seen on the last page of the press release.

If I missed, I’ll go back and find in the press release.

And there is a table which provides the adjustments of the non-GAAP expenses related specifically to cost of sales.

Yeah, you’re right, I see it, I missed it, okay. Yeah, I got it, thanks.

Thank you.

The next question is from [indiscernible]. Please go ahead.

Hi, can you tell me what was the headcount at the end of the fourth quarter?

The total number of employees is approximately 200 employees of which about 25 employees joined us by the acquisition of Fiberblaze.

Thank you.

The next question is by Edward Balinsky of Segmark. Please go ahead.

Can you tell me what the effect of the foreign exchange rate - the exchange rate has had on your operations? I have not tracked the path of the share but did - where you able - was there unusual bumped earnings because of - because the stuff is manufactured in Israel and so then the United States or was it - was the effect rather neutral?

Okay, first of all there was an effect, the effect is positive, it seems it’s not dramatic. The positive impact on our operating expense is in quarter four compared to quarter three for example is approximately $100,000.

Right, thank you very much.

There are no further questions at this time. Before I ask Mr. Orbach to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom’s website www.silicom-usa.com. Mr. Orbach, would you like to make your concluding statement.

Yes, thank you operator. Thank you everybody for joining the call. We look forward to hosting you on our next call in three months’ time. Good day.

Thank you. This concludes Silicom’s fourth quarter 2014 results conference call. Thank you for your participation, you may go ahead and disconnect.