EZchip Announces Record Third Quarter 2015 Results

YOKNEAM, Israel, Nov. 5, 2015 /PRNewswire/ -- EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in high-performance processing solutions for carrier and data center networks, today announced its results for the third quarter ended September 30, 2015.

Third Quarter 2015 Highlights:

• Third quarter revenues of $30.7 million
• Gross margin reached 75.2% on a non-GAAP basis
• Gross margin reached 74.1% on a GAAP basis
• Net income was $11.5 million on a non-GAAP basis
• Net income was $5.2 million on a GAAP basis
• Operating cash flow of $12.2 million
• Net cash at end of quarter was $200.4 million 

Third Quarter 2015 Results

Total revenues in the third quarter of 2015 were $30.7 million, an increase of 60% compared to $19.2 million in the third quarter of 2014, and an increase of 9% compared to $28.3 million in the second quarter of 2015.

Net income, on a GAAP basis, for the third quarter of 2015 was $5.2 million, or $0.17 per share (diluted), compared to net income of $4.2 million, or $0.14 per share (diluted), in the third quarter of 2014, and net income of $5.4 million, or $0.18 per share (diluted), in the second quarter of 2015.

Net income, on a non-GAAP basis, for the third quarter of 2015 was $11.5 million, or $0.36 per share (diluted), compared to non-GAAP net income of $8.5 million, or $0.28 per share (diluted), in the third quarter of 2014, and non-GAAP net income of $10.9 million, or $0.34 per share (diluted), in the second quarter of 2015.

Cash, cash equivalents, marketable securities and deposits as of September 30, 2015, totaled $200.4 million, compared to $189.0 million as of June 30, 2015. Cash generated from operations was $12.2 million, cash used in investing activities was $1.3 million, cash generated from financing activities was $0.6 million (resulting from the exercise of options), and a decrease of $0.1 million resulted from cash adjustment of marketable securities, net.

First Nine Months 2015 Results

Total revenues for the nine months ended September 30, 2015 were $85.9 million, a year-over-year increase of 39% compared to $61.6 million for the nine months ended September 30, 2014. Net income on a GAAP basis for the nine months ended September 30, 2015 was $2.4 million, which includes a one-time charge due to early repayment of $9.6 million to the Israeli Office of Chief Scientist (OCS), or $0.08 per share (diluted), compared to net income of $16.5 million, or $0.56 per share (diluted), for the nine months ended September 30, 2014. Net income on a non-GAAP basis for the nine months ended September 30, 2015 was $29.9 million or $0.94 per share (diluted), compared with non-GAAP net income of $29.6 million, or $0.96 per share (diluted), for the nine months ended September 30, 2014.

Fourth Quarter 2015 Outlook

With respect to guidance for the fourth quarter of 2015, the Company expects revenues to be approximately $25 million due to near-term inventory adjustments across several key customers that are serving the carrier networking space. The Company believes that this slowdown does not reflect the long-term outlook for the Company's performance nor the underlying business.

Eli Fruchter, CEO of EZchip, commented,

"We are pleased with our third quarter results, which reflected an increase in revenues and net income both sequentially and year over year. Heading into the fourth quarter, we expect a near-term slow-down in revenue.  We believe it is important that shareholders have the most updated outlook when making significant decisions about the future of their investment in EZchip."

Commenting on the pending transaction with Mellanox, Mr. Fruchter continued,

"As EZchip's founder and largest individual shareholder, I, together with the entire EZchip Board, urge shareholders to vote FOR the transaction with Mellanox at the upcoming Annual General Meeting.

"The fully financed, all-cash, $25.50 per share offer from Mellanox provides EZchip shareholders with immediate and certain cash value. This is in contrast to the headwinds a standalone EZchip could face as we continue to witness further industry consolidation and the moves of major customers toward in-house production for NPS-400 functionality. The EZchip Board has carefully managed the Company's sale process to secure what it believes is in the best interests of EZchip's shareholders. We remain confident that this transaction is in the best interest of our shareholders, as well as our customers, our employees and our Company."

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, acquisition related costs, amortization of purchased intangible assets and one-time charge due to early repayment of OCS grants. 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 high-performance processing solutions for a wide range of applications for the carrier, cloud and data center networks. EZchip's broad portfolio of solutions scales from a few to hundreds of Gigabits-per-second, and includes network processors, multi-core processors, intelligent network adapters, high-performance appliances and a comprehensive software ecosystem. EZchip's processing solutions excel at providing great flexibility and high performance coupled with superior integration and power efficiency. For more information on our company, visit the web site at http://www.ezchip.com.

Safe Harbor Statement

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 and the consummation of the merger with Mellanox Technologies, Ltd. 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 31, 2015 and its Current Reports on Form 6-K (including EZchip's Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015)). 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.

Important Additional Information

This communication is neither an offer to purchase nor a solicitation of an offer to sell securities. Shareholders are urged to read the Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015), together with the Merger Agreement and other exhibits thereto, in their entirety because they contain important information. The Proxy Statement, dated October 13, 2015 (including the Merger Agreement with Mellanox Technologies, Ltd. and the fairness opinion received by the EZchip Board), has been filed by EZchip with the SEC and mailed to shareholders. The Supplement to the Proxy Statement, dated October 26, 2015, has been filed by EZchip with the SEC and is being mailed to shareholders. Shareholders may also obtain a free copy of these statements and other documents filed by EZchip with the SEC at the website maintained by the SEC at www.sec.gov by directing such requests to:

MacKenzie Partners, Inc.
Toll-free: (800) 322-2885
Collect: (212) 929-5500

Contact:
Jeffrey A Schreiner
[email protected]
Tel: (US) 1 408 520 3676

SOURCE EZchip Semiconductor Ltd.

Related Links

http://www.ezchip.com