EZchip Announces Second Quarter 2012 Results
Significant sequential revenue decline expected in the third quarter with 2012 revenues likely to decline year-over-year
YOKNEAM, Israel, August 8, 2012 /PRNewswire/ --
EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the second quarter ended June 30, 2012.
Second Quarter 2012 Highlights:
- Second quarter revenues of $15.8 million
- Gross margin reached 81.7% on a GAAP basis and 82.2% on a non-GAAP basis
- Net income was $5.6 million on a GAAP basis, 35% of revenues
- Net income was $8.4 million on a non-GAAP basis, 53% of revenues
- Operating cash flow of $9.1 million
- End of quarter net cash was $153.8 million
Second Quarter 2012 Results:
Total revenues in the second quarter of 2012 were $15.8 million, a decrease of 9% compared to $17.3 million in the second quarter of 2011, and an increase of 10% compared to $14.4 million in the first quarter of 2012.
Net income, on a GAAPbasis, for the second quarter of 2012 was $5.6 million, or $0.19 per share (diluted), compared to net income of $4.8 million, or $0.17 per share (diluted), in the second quarter of 2011, and net income of $5.1 million, or $0.18 per share (diluted), in the first quarter of 2012.
Net income, on a non-GAAP basis, for the second quarter of 2012 was $8.4 million, or $0.29 per share (diluted), compared to non-GAAP net income of $9.4 million, or $0.33 per share (diluted), in the second quarter of 2011, and non-GAAP net income of $7.8 million, or $0.27 per share (diluted), in the first quarter of 2012.
Cash, cash equivalents, marketable securities and deposits as of June 30, 2012, totaled $153.8 million, compared to $145.2 million as of March 31, 2012. Cash generated from operations during the second quarter was $9.1 million, cash used in investing activities was $0.8 million and cash provided by financing activities (resulting from the exercise of options) was $0.3 million.
First Six Months 2012 Results
Total revenues for the six months ended June 30, 2012 were $30.2 million, a year-over-year decrease of 1% compared to $30.5 million for the six months ended June 30, 2011. Net income on a GAAP basis for the six months ended June 30, 2012 was $10.7 million, or $0.37 per share (diluted), compared to net income of $6.2 million, or $0.22 per share (diluted), for the six months ended June 30, 2011. Net income on a non-GAAP basis for the six months ended June 30, 2012 was $16.2 million or $0.55 per share (diluted), compared with non-GAAP net income of $14.8 million, or $0.52 per share (diluted), for the six months ended June 30, 2011.
Eli Fruchter, CEO of EZchip, commented, "In the second quarter of 2012 we continued to make progress in the marketplace. Cisco moved a second NP-4 based platform to production and ZTE became our second largest customer with strong NP-3 based purchases and a significant increase in initial production shipments of NP-4 based systems, and has started NP-5 designs. Our other NP-4 customers are still at the design phase with NP-4 and are still using the large amounts of samples they purchased last year to complete their systems testing and move to production. We believe that it might take these customers a longer time to go to production than we originally anticipated, partially because they are new to our technology and need more time for software development but also due to the global economy worries that slow up carriers CAPEX and which are likely to remain low during the second half of 2012. We believe this environment allows our new NP-4 based customers not to rush their next generation systems and continue to sell their older systems.
Revenues in the second half of 2012, as a result, are expected to be lower than initially anticipated with a significant sequential decline in the third quarter and with 2012 revenues likely to decline year-over-year. However, we continue to believe in our long-term, strong growth potential and are now expecting the revenue ramp to start in 2013.
It is a very disappointing short term guidance that delays our expected revenue ramp, but we believe it is just a delay that does not change our long term view. We continue to believe that all our NP-4 customers will move to production until the end of the year, carriers to increase spending, the growth in edge routing to resume, and our leadership in high speed network processors to advance."
Conference Call
The Company will be hosting a conference call later today, August 8, 2012, 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, amortization of intangible assets and taxes on income. 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 its customers with solutions that scale from 1-Gigabit to 200-Gigabits per second with a common architecture and software across all products. EZchip's network processors provide the flexibility and integration that enable triple-play data, voice and video services in systems that make up the new Carrier Ethernet networks. Flexibility and integration make EZchip's solutions ideal for building systems for a wide range of applications in telecom networks, enterprise backbones and data centers. 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. 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, 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 29, 2012 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 Six Months Ended
--------------------------------------- -------------------------
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
Revenues $ 15,798 $ 14,415 $ 17,306 $ 30,213 $ 30,485
Cost of revenues 2,887 2,179 3,535 5,066 6,514
Amortization of
purchased technology - - 298 - 597
----------- ----------- ----------- ----------- -----------
Gross profit 12,911 12,236 13,473 25,147 23,374
Operating expenses:
Research and
development, net 4,840 4,534 3,892 9,374 8,291
Selling, general
and administrative 3,200 3,167 3,062 6,367 6,006
----------- ----------- ----------- ----------- -----------
Total operating
expenses 8,040 7,701 6,954 15,741 14,297
----------- ----------- ----------- ----------- -----------
Operating income 4,871 4,535 6,519 9,406 9,077 Financial income,
net 682 597 369 1,279 695
----------- ----------- ----------- ----------- -----------
Income before taxes 5,553 5,132 6,888 10,685 9,772
Taxes on income - - (2,116) - (3,527)
----------- ----------- ----------- ----------- -----------
Net income $ 5,553 $ 5,132 $ 4,772 $ 10,685 $ 6,245
=========== =========== =========== =========== ===========
Net income per share:
Basic $ 0.20 $ 0.19 $ 0.18 $ 0.38 $ 0.24
Diluted $ 0.19 $ 0.18 $ 0.17 $ 0.37 $ 0.22
Weighted average
shares used in per
share calculation:
Basic 28,042,283 27,525,386 26,600,650 27,783,834 26,400,961
Diluted 28,823,804 28,517,609 27,911,054 28,700,836 27,798,963
----------- ----------- ----------- ----------- -----------
EZchip Semiconductor Ltd.
Reconciliation of GAAP to Non-GAAP Measures
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
--------------------------------------- -------------------------
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
GAAP gross profit $ 12,911 $ 12,236 $ 13,473 $ 25,147 $ 23,374
Stock-based
compensation 74 77 73 151 213
Amortization of
purchased technology - - 298 - 597
----------- ----------- ----------- ----------- -----------
Non-GAAP gross
profit $ 12,985 $ 12,313 $ 13,844 $ 25,298 $ 24,184
=========== =========== =========== =========== ===========
GAAP gross profit
as percentage
of revenues 81.7% 84.9% 77.9% 83.2% 76.7%
----------- ----------- ----------- ----------- -----------
Non-GAAP gross
profit as
percentage of
revenues 82.2% 85.4% 80.0% 83.7% 79.3%
=========== =========== =========== =========== ===========
GAAP operating
expenses $ 8,040 $ 7,701 $ 6,954 $ 15,741 $ 14,297
Stock-based
compensation:
Research and
development (1,545) (1,361) (1,119) (2,906) (2,245)
Selling, general
and administrative (1,216) (1,144) (908) (2,360) (1,738)
Amortization of
intangible assets
Selling, general
and administrative (51) (51) (95) (102) (190)
----------- ----------- ----------- ----------- -----------
Non-GAAP
operating
expenses $ 5,228 $ 5,145 $ 4,832 $ 10,373 $ 10,124
=========== =========== =========== =========== ===========
GAAP operating
income $ 4,871 $ 4,535 $ 6,519 $ 9,406 $ 9,077
----------- ----------- ----------- ----------- -----------
Non-GAAP
operating
income $ 7,757 $ 7,168 $ 9,012 $ 14,925 $ 14,060
=========== =========== =========== =========== ===========
GAAP net income $ 5,553 $ 5,132 $ 4,772 $ 10,685 $ 6,245
Stock-based
compensation 2,835 2,582 2,100 5,417 4,196
Amortization
of purchased
intangible assets 51 51 393 102 787
Taxes on income* - - 2,116 - 3,527
----------- ----------- ----------- ----------- -----------
Non-GAAP net
income $ 8,439 $ 7,765 $ 9,381 $ 16,204 $ 14,755
=========== =========== =========== =========== ===========
Non-GAAP net
income per share
- Diluted $ 0.29 $ 0.27 $ 0.33 $ 0.55 $ 0.52
Non-GAAP weighted
average shares
- Diluted** 29,540,537 29,144,661 28,455,818 29,343,540 28,297,526
* Taxes on income represent the non-cash utilization of a deferred tax
asset with respect to the Company's estimate of its accumulated taxable
income in accordance with FASB ASC 740. During 2011, EZchip Technologies,
the Company's main subsidiary completed the utilization of the deferred
tax asset, and started to enjoy the ten year period of exemption from
Israeli corporate taxes due to benefits provided pursuant to its Israeli
approved and privileged enterprise programs.
** 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)
June 30, December 31,
2012 2011
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable
securities and deposits $ 153,764 $ 126,770
Trade receivables, net 5,215 8,655
Other receivables 4,524 1,837
Inventories 5,992 5,788
------------ ------------
Total current assets 169,495 143,050
NON CURRENT ASSETS:
Severance pay fund 5,472 5,215
Long term investment and others 333 337
------------ ------------
Total non current assets 5,805 5,552
PROPERTY AND EQUIPMENT, NET 1,090 828
INTANGIBLE ASSETS, NET 1,103 1,205
GOODWILL 96,276 96,276
------------ ------------
TOTAL ASSETS $ 273,769 $ 246,911
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 746 $ 2,319
Other payables and accrued expenses 6,028 6,352
------------ ------------
Total current liabilities 6,774 8,671
ACCRUED SEVERANCE PAY 6,443 6,081
SHAREHOLDERS' EQUITY:
Share capital 160 155
Additional paid-in capital 305,820 288,641
Accumulated other comprehensive loss (436) (960)
Accumulated deficit (44,992) (55,677)
------------ ------------
Total shareholders' equity 260,552 232,159
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 273,769 $ 246,911
============ ============
EZchip Semiconductor Ltd.
Selected Condensed Consolidated Cash Flow Data on a Non-GAAP basis
(U.S. Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
--------------------------------------- -------------------------
June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
Cash flows from
operating
activities:
Net income $ 5,553 $ 5,132 $ 4,772 $ 10,685 $ 6,245
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 157 143 452 300 902
Decrease (increase)
in trade and other
receivables, net 76 681 (929) 757 366
Decrease (increase)
in inventory 974 (1,178) (12) (204) (1,438)
Decrease in
deferred tax asset - - 2,110 - 3,513
Increase (decrease)
in trade payables and
other accrued
liabilities, net (490) (463) 674 (953) 289
Stock-based
compensation 2,835 2,582 2,100 5,417 4,196
----------- ----------- ----------- ----------- -----------
Net cash provided
by operating
activities 9,105 6,897 9,167 16,002 14,073
----------- ----------- ----------- ----------- -----------
Cash flows from
investing activities:
Purchase of property
and equipment (338) (336) (51) (674) (176)
Purchase of
technology (500) - - (500) -
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities (838) (336) (51) (1,174) (176)
----------- ----------- ----------- ----------- -----------
Cash flows from
financing activities:
Proceeds from
exercise of options 352 11,415 3,432 11,767 5,905
----------- ----------- ----------- ----------- -----------
Net cash provided
by financing
activities 352 11,415 3,432 11,767 5,905
----------- ----------- ----------- ----------- -----------
Unrealized gain
(loss) on marketable
securities, net (79) 478 9 399 (82)
----------- ----------- ----------- ----------- -----------
Increase in cash, cash
equivalents,
marketable securities
and deposits 8,540 18,454 12,557 26,994 19,720
Cash, cash
equivalents,
marketable securities
and deposits at
the beginning of
the period 145,224 126,770 108,473 126,770 101,310
----------- ----------- ----------- ----------- -----------
Cash, cash
equivalents,
marketable
securities and
deposits at the
end of the period $ 153,764 $ 145,224 $ 121,030 $ 153,764 $ 121,030
=========== =========== =========== =========== ===========
Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
[email protected]
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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