EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the third quarter ended September 30, 2012.
Third Quarter 2012 Highlights:
- Third quarter revenues of $9.3 million
- Gross margin reached 83.9% on a GAAP basis and 84.7% on a non-GAAP basis
- Net income was $0.1 million on a GAAP basis
- Net income was $3.1 million on a non-GAAP basis
- Operating cash flow of $6.1 million
- End of quarter net cash was $160.1 million
Third Quarter 2012 Results:
Total revenues in the third quarter of 2012 were $9.3 million, a decrease of 50% compared to $18.7 million in the third quarter of 2011, and a decrease of 41% compared to $15.8 million in the second quarter of 2012.
Net income, on a GAAPbasis, for the third quarter of 2012 was $0.1 million, or $0.00 per share (diluted), compared to net income of $7.7 million, or $0.27 per share (diluted), in the third quarter of 2011, and net income of $5.6 million, or $0.19 per share (diluted), in the second quarter of 2012.
Net income, on a non-GAAP basis, for the third quarter of 2012 was $3.1 million, or $0.10 per share (diluted), compared to non-GAAP net income of $9.9 million, or $0.35 per share (diluted), in the third quarter of 2011, and non-GAAP net income of $8.4 million, or $0.29 per share (diluted), in the second quarter of 2012.
Cash, cash equivalents, marketable securities and deposits as of September 30, 2012, totaled $160.1 million, compared to $153.8 million as of June 30, 2012. Cash generated from operations during the third quarter was $6.1 million, cash used in investing activities was $0.1 million, cash provided by financing activities (resulting from the exercise of options) was $0.1 million and an increase of $0.2 million resulted from unrealized gain on marketable securities.
First Nine Months 2012 Results
Total revenues for the nine months ended September 30, 2012 were $39.5 million, a year-over-year decrease of 20% compared to $49.2 million for the nine months ended September 30, 2011. Net income on a GAAP basis for the nine months ended September 30, 2012 was $10.8 million, or $0.38 per share (diluted), compared to net income of $13.9 million, or $0.50 per share (diluted), for the nine months ended September 30, 2011. Net income on a non-GAAP basis for the nine months ended September 30, 2012 was $19.3 million or $0.65 per share (diluted), compared to non-GAAP net income of $24.7 million, or $0.87 per share (diluted), for the nine months ended September 30, 2011.
Eli Fruchter, CEO of EZchip, commented, "We are pleased to report that two additional large customers entered production with their NP-4 based platforms at the end of the third quarter and we expect a third large customer to enter production before the end of the year, resulting in our five major CESR customers being in production with NP-4 before the end of the year. We expect these customers to begin contributing to our revenues in the fourth quarter, and to contribute more significantly to our revenues in 2013. The actual revenue ramp from these new NP-4 platforms will depend on their success in the market and the CAPEX level of carriers."
"During the quarter we unveiled our upcoming product, the NPS - Network Processor for Smart networks - that we believe is a game changer. It integrates a 400 Gbps NPU, Traffic Manager, Deep Packet Inspection (DPI) and security functions, search engines, C programming and support for the Linux® operating system in one chip. The NPS will target the carrier, cloud and data center equipment markets and support Software Defined Networks (SDN), OpenFlow and virtualization. With NPS, we are targeting these markets with an extremely competitive product that merges functions provided by multiple devices today, at significantly higher speeds and significantly lower power consumption and cost. This is in addition to targeting our traditional edge routing market in which we believe the NPS leapfrogs in-house and other merchant silicon solutions with its L2-7 capabilities for next generation line cards."
Conference Call
The Company will be hosting a conference call later today, November 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 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. 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 Nine Months Ended
------------------------------------- -----------------------
September September September September
30, June 30, 30, 30, 30,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
Revenues $ 9,287 $ 15,798 $ 18,703 $ 39,500 $ 49,188
Cost of revenues 1,497 2,887 4,509 6,563 11,023
Amortization
of purchased
technology - - - - 597
----------- ----------- ----------- ----------- -----------
Gross profit 7,790 12,911 14,194 32,937 37,568
----------- ----------- ----------- ----------- -----------
Operating expenses:
Research and
development, net 5,182 4,840 4,052 14,556 12,343
Selling, general
and administrative 3,047 3,200 2,956 9,414 8,962
----------- ----------- ----------- ----------- -----------
Total operating
expenses 8,229 8,040 7,008 23,970 21,305
----------- ----------- ----------- ----------- -----------
Operating
income (loss) (439) 4,871 7,186 8,967 16,263
Financial income, net 566 682 467 1,845 1,162
----------- ----------- ----------- ----------- -----------
Income before taxes 127 5,553 7,653 10,812 17,425
Taxes on income - - 3 - 3,530
----------- ----------- ----------- ----------- -----------
Net income $ 127 $ 5,553 $ 7,650 $ 10,812 $ 13,895
=========== =========== =========== =========== ===========
Net income per
share:
Basic $ 0.00 $ 0.20 $ 0.28 $ 0.39 $ 0.52
Diluted $ 0.00 $ 0.19 $ 0.27 $ 0.38 $ 0.50
Weighted average
shares used in per
share calculation:
Basic 28,119,713 28,042,283 26,900,439 27,896,611 26,569,283
Diluted 28,748,784 28,823,804 28,046,688 28,762,602 27,912,322
----------- ----------- ----------- ----------- -----------
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
---------------------------------------- -------------------------
September September September September
30, June 30, 30, 30, 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
GAAP gross profit $ 7,790 $ 12,911 $ 14,194 $ 32,937 $ 37,568
Stock-based
compensation 73 74 73 224 286
Amortization of
purchased technology - - - - 597
----------- ----------- ----------- ----------- -----------
Non-GAAP gross
profit $ 7,863 $ 12,985 $ 14,267 $ 33,161 $ 38,451
----------- ----------- ----------- ----------- -----------
GAAP gross profit
as percentage of
revenues 83.9% 81.7% 75.9% 83.4% 76.4%
----------- ----------- ----------- ----------- -----------
Non-GAAP gross
profit as percentage
of revenues 84.7% 82.2% 76.3% 84.0% 78.2%
----------- ----------- ----------- ----------- -----------
GAAP operating
expenses $ 8,229 $ 8,040 $ 7,008 $ 23,970 $ 21,305
Stock-based
compensation:
Research and
development (1,557) (1,545) (1,107) (4,463) (3,352)
Selling, general
and administrative (1,249) (1,216) (1,012) (3,609) (2,750)
Amortization of
intangible assets
Selling, general and
administrative (51) (51) (95) (153) (285)
----------- ----------- ----------- ----------- -----------
Non-GAAP operating
expenses $ 5,372 $ 5,228 $ 4,794 $ 15,745 $ 14,918
----------- ----------- ----------- ----------- -----------
GAAP operating
income (loss) $ (439) $ 4,871 $ 7,186 $ 8,967 $ 16,263
----------- ----------- ----------- ----------- -----------
Non-GAAP operating
income $ 2,491 $ 7,757 $ 9,473 $ 17,416 $ 23,533
----------- ----------- ----------- ----------- -----------
GAAP net income $ 127 $ 5,553 $ 7,650 $ 10,812 $ 13,895
Stock-based
compensation 2,879 2,835 2,192 8,296 6,388
Amortization of
purchased intangible
assets 51 51 95 153 882
Taxes on income* - - 3 - 3,530
----------- ----------- ----------- ----------- -----------
Non-GAAP net income $ 3,057 $ 8,439 $ 9,940 $ 19,261 $ 24,695
----------- ----------- ----------- ----------- -----------
Non-GAAP net income
per share -
Diluted $ 0.10 $ 0.29 $ 0.35 $ 0.65 $ 0.87
Non-GAAP weighted
average shares
- Diluted** 29,588,230 29,540,537 28,577,753 29,421,692 28,381,465
* 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)
September December
30, 31,
2012 2011
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable securities and deposits $ 160,081 $ 126,770
Trade receivables, net 4,288 8,655
Other receivables 2,463 1,837
Inventories 5,471 5,788
----------- -----------
Total current assets 172,303 143,050
NON CURRENT ASSETS:
Severance pay fund 5,513 5,215
Long term investment and others 330 337
----------- -----------
Total non current assets 5,843 5,552
PROPERTY AND EQUIPMENT, NET 993 828
INTANGIBLE ASSETS, NET 1,052 1,205
GOODWILL 96,276 96,276
----------- -----------
TOTAL ASSETS $ 276,467 $ 246,911
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 385 $ 2,319
Other payables and accrued
expenses 5,389 6,352
----------- -----------
Total current liabilities 5,774 8,671
ACCRUED SEVERANCE PAY 6,481 6,081
SHAREHOLDERS' EQUITY:
Share capital 161 155
Additional paid-in capital 308,794 288,641
Accumulated other comprehensive income (loss) 122 (960)
Accumulated deficit (44,865) (55,677)
----------- -----------
Total shareholders' equity 264,212 232,159
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 276,467 $ 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 Nine Months Ended
--------------------------------------- -------------------------
September September September September
30, June 30, 30, 30, 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
Cash flows from
operating activities:
Net income $ 127 $ 5,553 $ 7,650 $ 10,812 $ 13,895
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation and
amortization 178 157 162 478 1,064
Decrease (increase)
in trade and other
receivables, net 2,991 76 (2,100) 3,748 (1,734)
Decrease (increase)
in inventory 521 974 (87) 317 (1,525)
Decrease in deferred
tax asset - - - - 3,513
Decrease in trade
payables and other
accrued liabilities,
net (585) (490) (1,996) (1,538) (1,707)
Stock-based
compensation 2,879 2,835 2,192 8,296 6,388
----------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities 6,111 9,105 5,821 22,113 19,894
----------- ----------- ----------- ----------- -----------
Cash flows from
investing activities:
Purchase of property
and equipment (95) (338) (138) (769) (314)
Purchase of technology - (500) - (500) -
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities (95) (838) (138) (1,269) (314)
----------- ----------- ----------- ----------- -----------
Cash flows from
financing activities:
Proceeds from exercise
of options 96 352 1,466 11,863 7,371
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities 96 352 1,466 11,863 7,371
----------- ----------- ----------- ----------- -----------
Unrealized gain (loss)
on marketable
securities, net 205 (79) (542) 604 (624)
----------- ----------- ----------- ----------- -----------
Increase in cash,
cash equivalents,
marketable securities
and deposits 6,317 8,540 6,607 33,311 26,327
Cash, cash
equivalents, marketable
securities and deposits
at the beginning of
the period 153,764 145,224 121,030 126,770 101,310
----------- ----------- ----------- ----------- -----------
Cash, cash
equivalents,
marketable
securities and
deposits at the end
of the period $ 160,081 $ 153,764 $ 127,637 $ 160,081 $ 127,637
=========== =========== =========== =========== ===========
Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
Email Contact
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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