EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the fourth quarter and full year ended December 31, 2011.
Fourth Quarter and Full Year 2011 Highlights:
- Annual revenues for 2011 of $63.5 million
- Fourth quarter revenues of $14.3 million
- Fourth quarter gross margin was 6.6% on a GAAP basis, including a one-time charge due to early repayment of $9.9 million to the Israeli Office of Chief Scientist (OCS)
- Fourth quarter gross margin on a non-GAAP basis reached 76.8%
- Net income of $7.9 million, on a GAAP basis, for 2011 and net loss of $6.0 million for the fourth quarter (including a one-time charge due to early repayment of $9.9 million to the OCS)
- Net income was $31.0 million, on a non-GAAP basis, for 2011 (49% of revenues) and $6.3 million for the fourth quarter (44% of revenues)
- Non-GAAP operating cash flow of $9.0 million for the quarter and $28.8 million for 2011
- End of 2011 net cash was $126.8 million
Fourth Quarter 2011 Results:
Total revenues in the fourth quarter of 2011 were $14.3 million, a decrease of 17% compared to $17.1 million in the fourth quarter of 2010, and a decrease of 24% compared to $18.7 million in the third quarter of 2011.
Net loss, on a GAAPbasis, for the fourth quarter of 2011 was $6.0 million, which includes a one-time charge due to early repayment of $9.9 million to the Israeli Office of Chief Scientist (OCS), or $0.22 per share, compared to net income of $4.0 million, or $0.15 per share (diluted), in the fourth quarter of 2010, and net income of $7.7 million, or $0.27 per share (diluted), in the third quarter of 2011.
Net income, on a non-GAAP basis, for the fourth quarter of 2011 was $6.3 million, or $0.22 per share (diluted), compared to non-GAAP net income of $8.6 million, or $0.31 per share (diluted), in the fourth quarter of 2010, and non-GAAP net income of $9.9 million, or $0.35 per share (diluted), in the third quarter of 2011.
Cash, cash equivalents and marketable securities as of December 31, 2011, totaled $126.8 million, compared to $127.6 million as of September 30, 2011. Cash generated from operations during the fourth quarter was $9.0 million, cash used in investing activities was $0.6 million, cash provided by financing activities (resulting from the exercise of options) was $0.7 million and additional $9.9 million used for the repayment of OCS grants.
Full Year 2011 Results
Total revenues for the year ended December 31, 2011 were $63.5 million, a year-over-year increase of 2% compared to $62.0 million in 2010.
Net income on a GAAP basis for 2011 was $7.9 million, or $0.28 per share (diluted), compared to net income of $13.6 million, or $0.52 per share (diluted), in 2010.
Net income on a non-GAAP basis for 2011was $31.0 million or $1.09 per share (diluted), compared with non-GAAP net income of $30.4 million, or $1.14 per share (diluted), in 2010.
Repayment of OCS Grants
During December 2011 we made a one-time early payment of $9.9 million to the Israeli Office of Chief Scientist, representing the full balance of the contingent liability related to the NP-4 and NPA grants received. Upon making this payment, we have eliminated all future royalty obligations related to our anticipated NP-4 and NPA revenues and saved the associated future interest payments related to such obligations.
Eli Fruchter, CEO of EZchip, commented, "2011 was a transition year for EZchip: a transition to Cisco as our largest customer, to NP-3 as our largest revenue generator and to NP-4 becoming our fastest growing product ever, accounting for 21% of 2011 revenues with over 90% related to sample shipments. NP-5 is well along in its development cycle and leading tier-1 customers have selected to continue the EZchip path with the NP-5. We believe that substantially all NP-4 customers will select the NP-5 for their next generation platforms. We are making good progress with our new product development in Kiryat Gat and we believe that we are building an extremely competitive, strongly differentiated product that will open a new market for EZchip and more than double our total addressable market. On the financial side in 2011, excluding our largest NP-2 customer (which declined 40% year over year), EZchip's revenues grew over 30% in a challenging year with global economy worries. We were also able to grow our gross margin and net income during the year.
"Looking ahead, we believe that the NP-4 can significantly increase our revenues in the coming years based on more platform wins, higher ASP and the forecasted demand. In the shorter term, we expect continued growth in 2012, mainly in the second half of the year when all NP-4 based systems are likely to be in production and when carriers are expected to resume strong investments in Internet infrastructure."
Conference Call
The Company will be hosting a conference call later today, February 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, 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.
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 31, 2011, as amended on September 27, 2011, 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 Twelve Months Ended
-------------------------------------- -----------------------
December September December December December
31, 30, 31, 31, 31,
2011 2011 2010 2011 2010
---------- ---------- ---------- ---------- ----------
Revenues $ 14,269 $ 18,703 $ 17,136 $ 63,457 $ 61,998
Cost of
revenues 3,386 4,509 4,461 14,409 15,668
Amortization
of purchased
technology -- -- 453 597 1,915
Repayment of
OCS grants 9,938 -- -- 9,938 --
---------- ---------- ---------- ---------- ----------
Gross profit 945 14,194 12,222 38,513 44,415
Operating
expenses:
Research and
development, net 4,352 4,052 3,577 16,695 13,665
Selling,
general and
administrative 3,097 2,956 2,617 12,059 10,001
---------- ---------- ---------- ---------- ----------
Total
operating
expenses 7,449 7,008 6,194 28,754 23,666
---------- ---------- ---------- ---------- ----------
Operating
income (loss) (6,504) 7,186 6,028 9,759 20,749
Financial
income, net 551 467 312 1,713 1,130
---------- ---------- ---------- ---------- ----------
Income (loss)
before taxes (5,953) 7,653 6,340 11,472 21,879
Taxes on
income -- (3) (2,314) (3,530) (8,236)
Net income ---------- ----------- ---------- ---------- -----------
(loss) $ (5,953) $ 7,650 $ 4,026 $ 7,942 $ 13,643
========== =========== ========== ========== ===========
Net income
(loss) per
share:
Basic $ (0.22) $ 0.28 $ 0.16 $ 0.30 $ 0.54
Diluted $ (0.22) $ 0.27 $ 0.15 $ 0.28 $ 0.52
Weighted
average shares
used in per
share calculation:
Basic 27,015,478 26,900,439 25,877,546 26,681,749 25,281,651
Diluted 27,015,478 28,046,688 27,130,392 28,001,428 26,110,132
---------- ---------- ---------- ---------- -----------
EZchip Semiconductor Ltd.
Reconciliation of GAAP to Non-GAAP Measures
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
-------------------------------------- -----------------------
December September December December December
31, 30, 31, 31, 31,
2011 2011 2010 2011 2010
---------- ---------- ---------- ---------- ----------
GAAP gross
profit $ 945 $ 14,194 $ 12,222 $ 38,513 $ 44,415
Stock-based
compensation 73 73 133 359 302
Amortization
of purchased
technology -- -- 453 597 1,915
Repayment of
OCS grants* 9,938 -- -- 9,938 --
Non-GAAP gross ---------- ---------- ---------- ---------- ----------
profit $ 10,956 $ 14,267 $ 12,808 $ 49,407 $ 46,632
---------- ---------- ---------- ---------- ----------
GAAP gross
profit as
percentage of
revenues 6.6% 75.9% 71.3% 60.7% 71.6%
---------- ---------- ---------- ---------- ----------
Non-GAAP gross
profit as
percentage of
revenues 76.8% 76.3% 74.7% 77.9% 75.2%
---------- ---------- ---------- ---------- ----------
GAAP operating
expenses $ 7,449 $ 7,008 $ 6,194 $ 28,754 $ 23,666
Stock-based
compensation:
Research and
development (1,094) (1,107) (782) (4,446) (2,941)
Selling,
general and
administrative (1,051) (1,012) (717) (3,801) (2,587)
Amortization
of intangible
assets
Selling,
general and
administrative (95) (95) (193) (380) (773)
Non-GAAP
operating ---------- ---------- ---------- ---------- ----------
expenses $ 5,209 $ 4,794 $ 4,502 $ 20,127 $ 17,365
---------- ---------- ---------- ---------- ----------
GAAP operating
income (loss) $ (6,504) $ 7,186 $ 6,028 $ 9,759 $ 20,749
Non-GAAP
operating ---------- ---------- ---------- ---------- ----------
income $ 5,747 $ 9,473 $ 8,306 $ 29,280 $ 29,267
---------- ---------- ---------- ---------- ----------
GAAP net
income (loss) $ (5,953) $ 7,650 $ 4,026 $ 7,942 $ 13,643
Stock-based
compensation 2,218 2,192 1,632 8,606 5,830
Amortization
of purchased
intangible
assets 95 95 646 977 2,688
Repayment of
OCS grants* 9,938 -- -- 9,938 --
Taxes on
income** -- 3 2,314 3,530 8,236
Non-GAAP net ---------- ---------- ---------- ---------- ----------
income $ 6,298 $ 9,940 $ 8,618 $ 30,993 $ 30,397
---------- ---------- ---------- ---------- ----------
Non-GAAP net
income per
share - Diluted $ 0.22 $ 0.35 $ 0.31 $ 1.09 $ 1.14
Non-GAAP
weighted
average shares
- Diluted*** 28,605,559 28,577,753 27,596,018 28,432,175 26,616,453
* During December 2011 we made a one-time early payment of $9.9 million to the Israeli Office of Chief Scientist, representing the full balance of the contingent liability related to the NP-4 and NPA grants received. Upon making this payment, we have eliminated all future royalty obligations related to our anticipated NP-4 and NPA revenues and saved the associated future interest payments related to such obligations. This amount was excluded from the non-GAAP statements of operations as it represents future royalty obligations.
** 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)
December 31, December 31,
2011 2010
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and marketable
securities $ 126,770 $ 101,310
Trade receivables, net 8,655 8,988
Other receivables 1,837 1,178
Inventories 5,788 4,522
Deferred tax assets, net -- 3,443
------------ ------------
Total current assets 143,050 119,441
NON CURRENT ASSETS:
Severance pay fund 5,215 5,209
Long term investment and others 337 335
------------ ------------
Total non current assets 5,552 5,544
PROPERTY AND EQUIPMENT, NET 828 419
Goodwill 96,276 96,276
Intangible assets, net 1,205 1,181
------------ ------------
TOTAL ASSETS $ 246,911 $ 222,861
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 2,319 $ 1,289
Other payables and accrued expenses 6,352 6,569
------------ ------------
Total current liabilities 8,671 7,858
LONG TERM LIABILITIES:
Accrued severance pay 6,081 5,974
SHAREHOLDERS' EQUITY:
Share capital 155 149
Additional paid-in capital 288,641 271,959
Accumulated other comprehensive income
(loss) (960) 540
Accumulated deficit (55,677) (63,619)
------------ ------------
Total shareholders' equity 232,159 209,029
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 246,911 $ 222,861
============ ============
EZchip Semiconductor Ltd.
Selected Condensed Consolidated Cash Flow Data on a Non-GAAP basis
(U.S. Dollars in thousands)
(Unaudited)
Twelve Months
Three Months Ended Ended
---------------------------------- --------------------
December September December December December
31, 30, 31, 31, 31,
2011 2011 2010 2011 2010
-------- --------- -------- -------- --------
Cash flows from
operating
activities:
Net income (loss) $ (5,953) $ 7,650 $ 4,026 $ 7,942 $ 13,643
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Repayment of OCS
grants* 9,938 -- -- 9,938 --
Depreciation and
amortization 163 162 696 1,227 2,887
Decrease
(increase) in
trade and other
receivables, net 1,113 (2,100) (1,677) (621) 2,133
Decrease
(increase) in
inventory 259 (87) (913) (1,266) (2,989)
Decrease in
deferred tax
asset -- -- 2,303 3,513 8,162
Increase
(decrease) in
trade payables
and other accrued
liabilities, net 1,213 (1,996) (608) (494) (4,077)
Stock-based
compensation 2,218 2,192 1,632 8,606 5,830
-------- --------- -------- -------- --------
Net cash provided
by operating
activities 8,951 5,821 5,459 28,845 25,589
-------- --------- -------- -------- --------
Cash flows from
investing
activities:
Purchase of
property and
equipment (97) (138) (74) (411) (385)
Purchase of
technology (500) -- -- (500) --
Cash paid for
investment in
affiliated
Company -- -- -- -- (200)
-------- --------- -------- -------- --------
Net cash used in
investing
activities (597) (138) (74) (911) (585)
-------- --------- -------- -------- --------
Cash flows from
financing
activities:
Proceeds from
issuance of share
capital -- -- -- -- 1,072
Proceeds from
exercise of
options 711 1,466 2,890 8,082 7,988
-------- --------- -------- -------- --------
Net cash provided
by financing
activities 711 1,466 2,890 8,082 9,060
-------- --------- -------- -------- --------
Repayment of OCS
grants* (9,938) -- -- (9,938) --
Unrealized gain
(loss) on
marketable
securities, net 6 (542) (99) (618) 8
-------- --------- -------- -------- --------
Increase
(decrease) in
cash, cash
equivalents and
marketable
securities (867) 6,607 8,176 25,460 34,072
Cash, cash
equivalents and
marketable
securities at the
beginning of the
period 127,637 121,030 93,134 101,310 67,238
-------- --------- -------- -------- --------
Cash, cash
equivalents and
marketable
securities at the
end of the period $126,770 $127,637 $101,310 $126,770 $101,310
========= ========= ========= ========= =========
* During December 2011 we made a one-time early payment of $9.9 million to the Israeli Office of Chief Scientist, representing the full balance of the contingent liability related to the NP-4 and NPA grants received. Upon making this payment, we have eliminated all future royalty obligations related to our anticipated NP-4 and NPA revenues and saved the associated future interest payments related to such obligations. This amount was excluded from the non-GAAP operating cash flow as it represents future royalty obligations.
Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
Email Contact
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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