EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the first quarter ended March 31, 2012.
First Quarter 2012 Highlights:
- First quarter revenues of $14.4 million
- Gross margin reached 84.9% on a GAAP basis and 85.4% on a non-GAAP basis
- Net income was $5.1 million on a GAAP basis, 36% of revenues
- Net income was $7.8 million on a non-GAAP basis, 54% of revenues
- Operating cash flow of $6.9 million
- End of quarter net cash was $145.2 million
First Quarter 2012 Results:
Total revenues in the first quarter of 2012 were $14.4 million, an increase of 9% compared to $13.2 million in the first quarter of 2011, and an increase of 1% compared to $14.3 million in the fourth quarter of 2011.
Net income, on a GAAP basis, for the first quarter of 2012 was $5.1 million, or $0.18 per share (diluted), compared to net income of $1.5 million, or $0.05 per share (diluted), in the first quarter of 2011, and a net loss of $6.0 million, or $0.22 per share, in the fourth quarter of 2011, which included a one-time charge due to early repayment of $9.9 million to the Israeli Office of Chief Scientist (OCS).
Net income, on a non-GAAP basis, for the first quarter of 2012 was $7.8 million, or $0.27 per share (diluted), compared to non-GAAP net income of $5.4 million, or $0.19 per share (diluted), in the first quarter of 2011, and non-GAAP net income of $6.3 million, or $0.22 per share (diluted), in the fourth quarter of 2011.
Cash, cash equivalents and marketable securities as of March 31, 2012, totaled $145.2 million, compared to $126.8 million as of December 31, 2011. Cash generated from operations during the first quarter was $6.9 million, cash used in investing activities was $0.3 million, cash provided by financing activities (resulting from the exercise of options) was $11.4 million and an increase of $0.4 million resulted from unrealized gain on marketable securities.
Eli Fruchter, CEO of EZchip, commented, "The first quarter of 2012 was the first full quarter of NP-4 production shipments and a record quarter in sales to our largest customer Cisco, resulting in an outstanding 85.4% non-GAAP gross margin and 54% non-GAAP net income margin. Cisco is the first customer in production with one NP-4 based platform, and we expect more NP-4 based platforms and additional customers to move to production in the coming months. Several of our NP-4 customers are now starting their NP-5 designs and we continue to believe that substantially all our NP-4 customers will select the NP-5 for their next generation platforms, making our NP-4 and NP-5 the leading merchant NPUs in edge routing for years to come. During the quarter Infonetics Research updated its Carrier Ethernet Equipment market forecast, which presents a very healthy growth rate in edge routing, EZchip's main market, with the number of ports expected to triple by 2016, making it the fastest growing carrier Ethernet market segment."
"During the quarter we continued to make good progress with our new product development in Kiryat Gat and we expect approximately half of our R&D expenses towards the end of 2012 to be spent on that product line, up from approximately 25% last year. We believe that we are building an extremely competitive, strongly differentiated product that will open new markets for EZchip and the initial feedback from customers is extremely positive."
The Company will be hosting a conference call later today, May 9, 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, one-time charge due to early repayment of OCS grants 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.
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.