2014

EZchip Announces Record Third Quarter 2013 Results

YOKNEAM, Israel, Nov. 6, 2013 /PRNewswire/ -- EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the third quarter ended September 30, 2013.  

Third Quarter 2013 Highlights:

  • Third quarter revenues of $18.8 million
  • Gross margin reached 84.4% on a GAAP basis and 84.8% on a non-GAAP basis
  • Net income, on a GAAP basis, was $6.5 million (35% of revenues)
  • Net income, on a non-GAAP basis, was $10.1 million (54% of revenues)
  • Operating cash flow of $10.3 million
  • Net cash at end of quarter was $190.6 million 

Third Quarter 2013 Results:

Total revenues in the third quarter of 2013 were $18.8 million, an increase of 102% compared to $9.3 million in the third quarter of 2012, and an increase of 13% compared to $16.7 million in the second quarter of 2013.

Net income, on a GAAP basis, for the third quarter of 2013 was $6.5 million, or $0.22 per share (diluted), compared to net income of $0.1 million, or $0.00 per share (diluted), in the third quarter of 2012, and net income of $5.1 million, or $0.18 per share (diluted), in the second quarter of 2013.

Net income, on a non-GAAP basis, for the third quarter of 2013 was $10.1 million, or $0.33 per share (diluted), compared to non-GAAP net income of $3.1 million, or $0.10 per share (diluted), in the third quarter of 2012, and non-GAAP net income of $8.7 million, or $0.29 per share (diluted), in the second quarter of 2013.

Cash, cash equivalents, marketable securities and deposits as of September 30, 2013, totaled $190.6 million, compared to $181.9 million as of June 30, 2013. Cash generated from operations was $10.3 million, cash used in investing activities was $2.0 million and cash provided by financing activities (resulting from the exercise of options) was $0.4 million.

First Nine Months 2013 Results

Total revenues for the nine months ended September 30, 2013 were $50.8 million, a year-over-year increase of 28% compared to $39.5 million for the nine months ended September 30, 2012. Net income on a GAAP basis for the nine months ended September 30, 2013 was $15.2 million, or $0.52 per share (diluted), compared to net income of $10.8 million, or $0.38 per share (diluted), for the nine months ended September 30, 2012. Net income on a non-GAAP basis for the nine months ended September 30, 2013 was $25.5 million or $0.85 per share (diluted), compared with non-GAAP net income of $19.3 million, or $0.65 per share (diluted), for the nine months ended September 30, 2012.

Eli Fruchter, CEO of EZchip, commented, "We are pleased to report a record quarter in revenues and profits primarily driven by  recent improvements in carriers capex towards edge routing.  During the third quarter we continued the testing of the NP-5 samples that arrived last quarter and are pleased to report that testing is proceeding according to plan and we expect the NP-5 to move to production next year.

"In its latest NPU market report published last month, The Linley Group discussed the NPS and emphasized that the evolutionary approach to NPU designs will be unable to keep pace with carriers' requirements and that a revolutionary approach is required, such as the bold move that EZchip made in developing the NPS. 

"Furthermore, based on the market share analysis provided in The Linley report and taking into account EZchip's sales to Cisco through Marvell, in 2012 EZchip became, for the first time, the overall NPU market share leader, with 23% of the market.  With EZchip's current growth rate, we believe our market leadership position will likely strengthen in 2013 and beyond."

Conference Call

The Company will be hosting a conference call later today, November 6, 2013, at 10:00am ET, 7:00am PT, 3:00pm UK time and 5:00pm Israel time. On the call, management will review and discuss the results, and will be available to answer investor questions.

To participate through the live webcast, please access the investor relations section of the Company's web site at: http://www.ezchip.com/investor_relations.htm, at least 10 minutes before the conference call commences. If you would like to ask a question on the call, please contact the investor relations team for the telephone dial in numbers.

For those unable to listen to the live webcast, a replay of the webcast will be available the day after the call under the 'Investor Relations' section of the website.

Use of Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with United States generally accepted accounting principles (GAAP), this release of operating results also contains non-GAAP financial measures, which EZchip believes are the principal indicators of the operating and financial performance of its business. The non-GAAP financial measures exclude the effects of stock-based compensation expenses recorded in accordance with FASB ASC 718 and amortization of intangible assets. Management believes the non-GAAP financial measures provided are useful to investors' understanding and assessment of the Company's on-going core operations and prospects for the future, as the charges eliminated are not part of the day-to-day business or reflective of the core operational activities of the Company.  Management uses these non-GAAP financial measures as a basis for strategic decisions, forecasting future results and evaluating the Company's current performance.  However, such measures should not be considered in isolation or as substitutes for results prepared in accordance with GAAP.  Reconciliation of the non-GAAP measures to the most comparable GAAP measures are provided in the schedules attached to this release.

About EZchip

EZchip is a fabless semiconductor company that provides Ethernet network processors for networking equipment. EZchip provides solutions that scale from a few to hundreds of Gigabits-per-second. EZchip's network processors provide great flexibility and high performance coupled with superior integration and power efficiency for a wide range of applications in carrier, cloud and data center network equipment.  For more information on our company, visit the web site at http://www.ezchip.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are statements that are not historical facts and may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance.  These statements are only predictions based on EZchip's current expectations and projections about future events based on its current knowledge.  There are important factors that could cause EZchip's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements.  Those factors include, but are not limited to, the impact of general economic conditions, competitive products (including in-house customer developed products), product demand and market acceptance risks, customer order cancellations, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly-complex products and other factors indicated in EZchip's filings with the Securities and Exchange Commission (SEC).  For more details, refer to EZchip's SEC filings and the amendments thereto, including its Annual Report on Form 20-F filed on March 21, 2013 and its Current Reports on Form 6-K. EZchip undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in our expectations, except as may be required by law.

 


EZchip Semiconductor Ltd.

Condensed Consolidated Statements of Operations

(U.S. Dollars in thousands, except per share amounts)

(Unaudited)




Three Months Ended


Nine Months Ended



Sept. 30,


June 30,


Sept. 30,


Sept. 30,


Sept. 30,



2013


2013


2012


2013


2012












Revenues


$       18,804


$       16,653


$       9,287


$     50,753


$     39,500

Cost of revenues


2,926


2,475


1,497


8,342


6,563

Gross profit


15,878


14,178


7,790


42,411


32,937












Operating expenses:











Research and development, net


6,527


6,267


5,182


18,892


14,556

Selling, general and administrative


3,310


3,269


3,047


9,836


9,414

Total operating expenses


9,837


9,536


8,229


28,728


23,970












Operating income (loss)


6,041


4,642


(439)


13,683


8,967

Financial income, net


487


505


566


1,502


1,845

Net income


$        6,528


$        5,147


$        127


$      15,185


$      10,812












Net income per share:











Basic


$          0.23


$          0.18


$          0.00


$        0.53


$        0.39

Diluted


$          0.22


$          0.18


$          0.00


$        0.52


$        0.38

Weighted average shares used in per share calculation:











Basic


28,717,575

 


28,571,954

 


28,119,713

 


28,562,581

 


27,896,611

 

Diluted


29,151,003

 


28,917,717

 


28,748,784

 


29,092,293

 


28,762,602

 























 

EZchip Semiconductor Ltd.

Reconciliation of GAAP to Non-GAAP Measures

(U.S. Dollars in thousands, except per share amounts)

(Unaudited)








Three Months Ended


Nine Months Ended



Sept. 30,


June 30,


Sept. 30,


Sept. 30,


Sept. 30,



2013


2013


2012


2013


2012












GAAP gross profit


$ 15,878


$ 14,178


$ 7,790


$ 42,411


$ 32,937

Stock-based compensation


73


73


73


219


224

Non-GAAP gross profit


$ 15,951


$ 14,251


$ 7,863


$ 42,630


$ 33,161












GAAP gross profit as percentage of revenues


84.4%


85.1%


83.9%


83.6%


83.4%

Non-GAAP gross profit as percentage of revenues


84.8%


85.6%


84.7%


84.0%


84.0%























GAAP operating expenses


$ 9,837


$ 9,536


$ 8,229


$ 28,728


$ 23,970

Stock-based compensation:











Research and development


(2,044)


(2,049)


(1,557)


(5,918)


(4,463)

Selling, general and administrative


(1,425)


(1,398)


(1,249)


(4,150)


(3,609)

Amortization of intangible assets











Selling, general and administrative


--


--


(51)


--


(153)












Non-GAAP operating expenses


$ 6,368


$ 6,089


$ 5,372


$ 18,660


$ 15,745























GAAP operating income (loss)


$ 6,041


$ 4,642


$ (439)


$ 13,683


$ 8,967












Non-GAAP operating income


$ 9,583


$ 8,162


$ 2,491


$ 23,970


$ 17,416












GAAP net income


$ 6,528


$ 5,147


$ 127


$ 15,185


$ 10,812

Stock-based compensation


3,542


3,520


2,879


10,287


8,296

Amortization of purchased intangible assets


--


--


51


--


153












Non-GAAP net income


$ 10,070


$ 8,667


$ 3,057


$ 25,472


$ 19,261












Non-GAAP net income per share - Diluted


$ 0.33


$ 0.29


$ 0.10


$ 0.85


$ 0.65

Non-GAAP weighted average shares - Diluted*


30,164,874


30,086,653


29,588,230


30,032,150


29,421,692


* In calculating diluted non-GAAP net income per share, the diluted weighted average number of shares outstanding excludes the effects of stock-based compensation expenses in accordance with FASB ASC 718.

 


EZchip Semiconductor Ltd.

Condensed Consolidated Balance Sheet

(U.S. Dollars in thousands)








September 30,


December 31,



2013


2012



(Unaudited)


(Audited)

ASSETS





CURRENT ASSETS:





Cash, cash equivalents, marketable securities and deposits


$      190,630


$      167,968

Trade receivables, net


6,073


4,813

Other receivables


5,676


4,305

Inventories


5,291


4,523

Total current assets


207,670


181,609






NON CURRENT ASSETS:





Severance pay fund


7,101


6,066

Long term investment and others


364


358

Total non current assets


7,465


6,424






PROPERTY AND EQUIPMENT, NET


2,196


1,285






INTANGIBLE ASSETS, NET


2,419


1,000






GOODWILL


96,276


96,276






TOTAL ASSETS


$      316,026


$     286,594





LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES:





Trade payables


$          1,420


$           571

Other payables and accrued expenses


6,491


5,401

Total current liabilities


7,911


5,972











ACCRUED SEVERANCE PAY


7,896


6,977






SHAREHOLDERS' EQUITY:





Share capital


164


161

Additional paid-in capital


324,297


312,723

Accumulated other comprehensive income


599


787

Accumulated deficit


(24,841)


(40,026)

Total shareholders' equity


300,219


273,645






TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$        316,026


$       286,594

















 

EZchip Semiconductor Ltd.

Selected Condensed Consolidated Cash Flow Data on a Non-GAAP Basis

(U.S. Dollars in thousands)

(Unaudited)

 



Three Months Ended


Nine Months Ended



Sept. 30,


June 30,


Sept. 30,


Sept. 30,


Sept. 30,



2013


2013


2012


2013


2012

Cash flows from operating activities:











Net income


$     6,528


$     5,147


$        127


$     15,185


$     10,812

Adjustments to reconcile net income to net cash provided by operating activities:











Depreciation and amortization


158


129


178


442


478

Decrease (increase) in trade and other receivables, net


 

(2,083)


 

859


 

3,181


 

(2,224)


 

4,183

Decrease (increase) in inventory


584


(725)


521


(768)


317

Increase (decrease) in trade payables and other accrued liabilities, net


 

1,605


 

(1,480)


 

(585)


 

1,791


 

(1,538)

Stock-based compensation

 


3,542


3,520


2,879


10,287


8,296

Net cash provided by operating activities


10,334


7,450


6,301


24,713


22,548












Cash flows from investing activities:











Purchase of property and equipment


(846)


(255)


(95)


(1,446)


(769)

Purchase of technology

 


(1,163)


--


--


(1,294)


(500)

Net cash used in investing activities


(2,009)


(255)


(95)


(2,740)


(1,269)












Cash flows from financing activities:











Proceeds from exercise of options

 


450


780


96


1,284


11,863

Net cash provided by financing activities


450


780


96


1,284


11,863












Cash adjustment of marketable securities, net*


(20)


(388)


15


(595)


169












Increase in cash, cash equivalents, marketable securities and deposits

 


 

8,755


 

7,587


 

6,317


 

22,662


 

33,311

Cash, cash equivalents, marketable securities and deposits at the beginning of the period


 

181,875


 

174,288


 

153,764


 

167,968


 

126,770

 

Cash, cash equivalents, marketable securities and deposits at the end of the period


 

 

$   190,630


 

 

$   181,875


 

 

$   160,081


 

 

$   190,630


 

 

$   160,081

* Including unrealized gain (loss) on marketable securities, accumulated interest accretion and amortization of discount and premium on marketable securities.

Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
ezchip@ccgisrael.com
Tel: (US) 1 646 201 9246

SOURCE EZchip Semiconductor Ltd.



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