EZchip Announces Record Third Quarter 2013 Results

              EZchip Announces Record Third Quarter 2013 Results

PR Newswire

YOKNEAM, Israel, Nov. 6, 2013

YOKNEAM, Israel, Nov. 6, 2013 /PRNewswire/ -- EZchip Semiconductor Ltd.
(NASDAQ: EZCH), a leader in Ethernet network processors, today announced its
results for the third quarter ended September 30, 2013. 

Third Quarter 2013 Highlights:

  oThird quarter revenues of $18.8 million
  oGross margin reached 84.4% on a GAAP basis and 84.8% on a non-GAAP basis
  oNet income, on a GAAP basis, was $6.5 million (35% of revenues)
  oNet income, on a non-GAAP basis, was $10.1 million (54% of revenues)
  oOperating cash flow of $10.3 million
  oNet cash at end of quarter was $190.6 million

Third Quarter 2013 Results:

Total revenues in the third quarter of 2013 were $18.8 million, an increase of
102% compared to $9.3 million in the third quarter of 2012, and an increase of
13% compared to $16.7 million in the second quarter of 2013.

Net income, on a GAAP basis, for the third quarter of 2013 was $6.5 million,
or $0.22 per share (diluted), compared to net income of $0.1 million, or $0.00
per share (diluted), in the third quarter of 2012, and net income of $5.1
million, or $0.18 per share (diluted), in the second quarter of 2013.

Net income, on a non-GAAP basis, for the third quarter of 2013 was $10.1
million, or $0.33 per share (diluted), compared to non-GAAP net income of $3.1
million, or $0.10 per share (diluted), in the third quarter of 2012, and
non-GAAP net income of $8.7 million, or $0.29 per share (diluted), in the
second quarter of 2013.

Cash, cash equivalents, marketable securities and deposits as of September30,
2013, totaled $190.6 million, compared to $181.9 million as of June 30, 2013.
Cash generated from operations was $10.3 million, cash used in investing
activities was $2.0 million and cash provided by financing activities
(resulting from the exercise of options) was $0.4 million.

First Nine Months 2013 Results

Total revenues for the nine months ended September 30, 2013 were $50.8
million, a year-over-year increase of 28% compared to $39.5 million for the
nine months ended September30, 2012. Net income on a GAAP basis for the nine
months ended September 30, 2013 was $15.2 million, or $0.52 per share
(diluted), compared to net income of $10.8 million, or $0.38 per share
(diluted), for the nine months ended September 30, 2012. Net income on a
non-GAAP basis for the nine months ended September30, 2013 was $25.5 million
or $0.85 per share (diluted), compared with non-GAAP net income of $19.3
million, or $0.65 per share (diluted), for the nine months ended September30,
2012.

Eli Fruchter, CEO of EZchip, commented, "We are pleased to report a record
quarter in revenues and profits primarily driven by recent improvements in
carriers capex towards edge routing. During the third quarter we continued
the testing of the NP-5 samples that arrived last quarter and are pleased to
report that testing is proceeding according to plan and we expect the NP-5 to
move to production next year.

"In its latest NPU market report published last month, The Linley Group
discussed the NPS and emphasized that the evolutionary approach to NPU designs
will be unable to keep pace with carriers' requirements and that a
revolutionary approach is required, such as the bold move that EZchip made in
developing the NPS.

"Furthermore, based on the market share analysis provided in The Linley report
and taking into account EZchip's sales to Cisco through Marvell, in 2012
EZchip became, for the first time, the overall NPU market share leader, with
23% of the market. With EZchip's current growth rate, we believe our market
leadership position will likely strengthen in 2013 and beyond."

Conference Call

The Company will be hosting a conference call later today, November 6, 2013,
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 and amortization of intangible assets. 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 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
21, 2013 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
                    Sept. 30,   June 30,    Sept. 30,   Sept. 30,   Sept. 30,
                    2013        2013        2012        2013        2012
Revenues            $        $        $        $         $  
                    18,804      16,653      9,287       50,753      39,500
Cost of revenues    2,926       2,475       1,497       8,342       6,563
Gross profit        15,878      14,178      7,790       42,411      32,937
Operating
expenses:
Research and        6,527       6,267       5,182       18,892      14,556
development, net
Selling, general    3,310       3,269       3,047       9,836       9,414
and administrative
Total operating     9,837       9,536       8,229       28,728      23,970
expenses
Operating income    6,041       4,642       (439)       13,683      8,967
(loss)
Financial income,   487         505         566         1,502       1,845
net
Net income          $        $        $        $         $  
                    6,528      5,147      127        15,185     10,812
Net income per
share:
Basic               $       $       $       $        $   
                    0.23       0.18       0.00       0.53       0.39
Diluted             $       $       $       $        $   
                    0.22       0.18       0.00       0.52       0.38
Weighted average
shares used in per
share calculation:
                    28,717,575  28,571,954  28,119,713  28,562,581  27,896,611
Basic
                                                                
                    29,151,003  28,917,717  28,748,784  29,092,293  28,762,602
Diluted
                                                                



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
                    Sept. 30,   June 30,    Sept. 30,   Sept. 30,   Sept. 30,
                    2013        2013        2012        2013        2012
GAAP gross profit   $ 15,878    $ 14,178    $ 7,790     $ 42,411    $ 32,937
Stock-based         73          73          73          219         224
compensation
Non-GAAP gross      $ 15,951    $ 14,251    $ 7,863     $ 42,630    $ 33,161
profit
GAAP gross profit
as percentage of    84.4%       85.1%       83.9%       83.6%       83.4%
revenues
Non-GAAP gross
profit as           84.8%       85.6%       84.7%       84.0%       84.0%
percentage of
revenues
GAAP operating      $ 9,837     $ 9,536     $ 8,229     $ 28,728    $ 23,970
expenses
Stock-based
compensation:
Research and        (2,044)     (2,049)     (1,557)     (5,918)     (4,463)
development
Selling, general    (1,425)     (1,398)     (1,249)     (4,150)     (3,609)
and administrative
Amortization of
intangible assets
Selling, general    --          --          (51)        --          (153)
and administrative
Non-GAAP operating  $ 6,368     $ 6,089     $ 5,372     $ 18,660    $ 15,745
expenses
GAAP operating      $ 6,041     $ 4,642     $ (439)     $ 13,683    $ 8,967
income (loss)
Non-GAAP operating  $ 9,583     $ 8,162     $ 2,491     $ 23,970    $ 17,416
income
GAAP net income     $ 6,528     $ 5,147     $ 127       $ 15,185    $ 10,812
Stock-based         3,542       3,520       2,879       10,287      8,296
compensation
Amortization of
purchased           --          --          51          --          153
intangible assets
Non-GAAP net        $ 10,070    $ 8,667     $ 3,057     $ 25,472    $ 19,261
income
Non-GAAP net
income per share -  $ 0.33      $ 0.29      $ 0.10      $ 0.85      $ 0.65
Diluted
Non-GAAP weighted
average shares -    30,164,874  30,086,653  29,588,230  30,032,150  29,421,692
Diluted*
* 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 30,     December 31,
                                             2013              2012
                                             (Unaudited)       (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable           $   190,630    $   167,968
securities and deposits
Trade receivables, net                       6,073             4,813
Other receivables                            5,676             4,305
Inventories                                  5,291             4,523
Total current assets                         207,670           181,609
NON CURRENT ASSETS:
Severance pay fund                           7,101             6,066
Long term investment and others              364               358
Total non current assets                     7,465             6,424
PROPERTY AND EQUIPMENT, NET                  2,196             1,285
INTANGIBLE ASSETS, NET                       2,419             1,000
GOODWILL                                     96,276            96,276
TOTAL ASSETS                                 $   316,026    $   286,594
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables                               $     1,420  $      571
Other payables and accrued expenses          6,491             5,401
Total current liabilities                    7,911             5,972
ACCRUED SEVERANCE PAY                        7,896             6,977
SHAREHOLDERS'  EQUITY:
Share capital                                164               161
Additional paid-in capital                   324,297           312,723
Accumulated other comprehensive income       599               787
Accumulated deficit                          (24,841)          (40,026)
Total shareholders' equity                   300,219           273,645
TOTAL LIABILITIES AND SHAREHOLDERS'          $    316,026  $    286,594
EQUITY



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
                          Sept. 30,  June 30,  Sept. 30,  Sept. 30,  Sept. 30,
                          2013       2013      2012       2013       2012
Cash flows from
operating activities:
Net income                $        $       $       $        $  
                          6,528      5,147     127       15,185     10,812
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and          158        129       178        442        478
amortization
Decrease (increase) in                                           
trade and other
receivables, net          (2,083)    859       3,181      (2,224)    4,183
Decrease (increase) in    584        (725)     521        (768)      317
inventory
Increase (decrease) in                                           
trade payables and other
accrued liabilities, net  1,605      (1,480)   (585)      1,791      (1,538)
Stock-based compensation
                          3,542      3,520     2,879      10,287     8,296

Net cash provided by      10,334     7,450     6,301      24,713     22,548
operating activities
Cash flows from
investing activities:
Purchase of property and  (846)      (255)     (95)       (1,446)    (769)
equipment
Purchase of technology
                          (1,163)    --        --         (1,294)    (500)

Net cash used in          (2,009)    (255)     (95)       (2,740)    (1,269)
investing activities
Cash flows from
financing activities:
Proceeds from exercise
of options                450        780       96         1,284      11,863


Net cash provided by      450        780       96         1,284      11,863
financing activities
Cash adjustment of
marketable securities,    (20)       (388)     15         (595)      169
net*
Increase in cash, cash
equivalents, marketable                                          
securities and deposits
                          8,755      7,587     6,317      22,662     33,311

Cash, cash equivalents,                                          
marketable securities
and deposits at the       181,875    174,288   153,764    167,968    126,770
beginning of the period
                                                                

Cash, cash equivalents,                                          
marketable securities
and deposits at the end   $         $        $         $         $ 
of the period             190,630    181,875   160,081    190,630    160,081

* Including unrealized gain (loss) on marketable securities, accumulated
interest accretion and amortization of discount and premium on marketable
securities.

Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
ezchip@ccgisrael.com
Tel: (US) 1 646 201 9246

SOURCE EZchip Semiconductor Ltd.

Website: http://www.ezchip.com
 
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