EZchip Announces Record Fourth Quarter And Full Year 2013 Results

      EZchip Announces Record Fourth Quarter And Full Year 2013 Results

PR Newswire

YOKNEAM, Israel, Feb. 12, 2014

YOKNEAM, Israel, Feb. 12, 2014 /PRNewswire/ --EZchip Semiconductor Ltd.
(NASDAQ: EZCH), a leader in Ethernet network processors, today announced its
results for the fourth quarter and full year ended December31, 2013. 

Fourth Quarter and Full Year 2013 Highlights:

  oRevenues of $70.9 million for 2013 and $20.1 million for the fourth
    quarter
  oGross margin, on a GAAP basis, was 83.0% for 2013 and 81.7% for the fourth
    quarter
  oGross margin, on a non-GAAP basis, was 83.4% for 2013 and 82.1% for the
    fourth quarter
  oNet income, on a GAAP basis, was $21.7 million for 2013 and $6.5 million
    for the fourth quarter
  oNet income, on a non-GAAP basis, was $35.6 million for 2013 (50% of
    revenues) and $10.1 million for the fourth quarter (50% of revenues)
  oOperating cash flow of $37.6 million for 2013 and $12.9 million for the
    fourth quarter
  oNet cash at end of 2013 was $202.9 million 

Fourth Quarter 2013 Results:

Total revenues in the fourth quarter of 2013 were $20.1 million, an increase
of 32% compared to $15.2 million in the fourth quarter of 2012, and an
increase of 7% compared to $18.8 million in the third quarter of 2013.

Net income, on a GAAP basis, for the fourth quarter of 2013 was $6.5 million,
or $0.22 per share (diluted), compared to net income of $4.8 million, or $0.17
per share (diluted), in the fourth quarter of 2012, and net income of $6.5
million, or $0.22 per share (diluted), in the third quarter of 2013.

Net income, on a non-GAAP basis, for the fourth quarter of 2013 was $10.1
million, or $0.34 per share (diluted), compared to non-GAAP net income of $7.8
million, or $0.26 per share (diluted), in the fourth quarter of 2012, and
non-GAAP net income of $10.1 million, or $0.33 per share (diluted), in the
third quarter of 2013.

Cash, cash equivalents, marketable securities and deposits as of December31,
2013, totaled $202.9 million, compared to $190.6 million as of September 30,
2013. Cash generated from operations was $12.9 million, cash used in investing
activities was $0.7 million and cash provided by financing activities
(resulting from the exercise of options) was $0.1 million.

Full Year 2013 Results:

Total revenues for the year ended December 31, 2013 were $70.9 million, a
year-over-year increase of 30% compared to $54.7 million in 2012.

Net income on a GAAP basis for 2013 was $21.7 million, or $0.74 per share
(diluted), compared to net income of $15.7 million, or $0.54 per share
(diluted), in 2012.

Net income on a non-GAAP basis for 2013 was $35.6 million or $1.18 per share
(diluted), compared with non-GAAP net income of $27.1 million, or $0.92 per
share (diluted), in 2012.

Cash, cash equivalents, marketable securities and deposits as of December31,
2013, totaled $202.9 million, compared to $168.0 million as of December 31,
2012. Cash generated from operations was $37.6 million, cash used in investing
activities was $3.5 million, cash provided by financing activities (resulting
from the exercise of options) was $1.4 million and a decrease of $0.6 million
resulted from cash adjustment of marketable securities, net.

Eli Fruchter, CEO of EZchip, commented, "2013 has been a record year for
EZchip in revenues, operating and net income. Revenues increased 30% year over
year with an outstanding 50% net margin. We believe our 2013 growth likely
exceeded the growth in the merchant NPU market and the growth in the edge
routing market, and that such growth likely resulted in an increase to our
market share in 2013.

"During the year, we completed the transition from NP-2 and NP-3 to NP-4 and
we are pleased to confirm that all our NP-4 customers and all NP-4 platforms
are now in production. NP-4 entered production at the end of 2011, exceeded
the NP-3 run rate at the end of 2012, and generated more than 50% of our
revenues in 2013, representing over 100% increase from 2012. We expect NP-4
revenues to continue to increase in 2014, assuming the router spending level
the market experienced in 2013 continues and our key customers continue to
gain market share.

"In 2013 we sampled the NP-5, our fifth generation NP, that is now being used
by our customers to build their NP-5 based platforms. We expect these
platforms to enter production in the second half of 2014. We have provided our
customers with a new product generation every three years and we are proud to
report that we have been able to gain more customers and design wins as we
move from each generation to the next. We believe that NP-5 is on track to be
yet another successful product.

"In 2013 we also laid the foundation for a transition to the NPS line of
network processors, targeting many different market segments such as switches
and routers, network monitoring, lawful interception, network appliances, load
balancers, DPI, security, network virtualization, NFV and SDN, all with a
single chip. We believe that we will be able to win in these market segments
and significantly diversify our customer base as a result, thereby reducing
our current customer concentration. Tier-1 customers in all these market
segments have expressed a strong interest in NPS and we believe that the NPS
will start gaining customer wins in the second half of 2014, which implies
customer product prototypes in 2015 and the start of production in 2016."

Conference Call

The Company will be hosting a conference call later today, February 12, 2014,
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                  Twelve Months Ended
                    Dec. 31,    Sept. 30,   Dec. 31,    Dec. 31,    Dec. 31,
                    2013        2013        2012        2013        2012
Revenues            $        $        $        $         $  
                    20,097      18,804      15,207      70,850      54,707
Cost of revenues    3,680       2,926       2,555       12,022      9,118
Gross profit        16,417      15,878      12,652      58,828      45,589
Operating
expenses:
Research and        6,923       6,527       5,180       25,815      19,736
development, net
Selling, general    3,527       3,310       3,220       13,363      12,634
and administrative
Total operating     10,450      9,837       8,400       39,178      32,370
expenses
                    5,967       6,041       4,252       19,650      13,219
Operating income
                                                                
Financial income,   546         487         587         2,048       2,432
net
Net income          $        $        $        $         $  
                    6,513      6,528      4,839      21,698     15,651
Net income per
share:
Basic               $       $       $       $        $   
                    0.23       0.23       0.17       0.76       0.56
Diluted             $       $       $       $        $   
                    0.22       0.22       0.17       0.74       0.54
Weighted average
shares used in
per share
calculation:
Basic               28,825,291  28,717,575  28,233,299  28,628,798  27,981,243
Diluted             29,171,552  29,151,003  28,869,499  29,188,736  28,842,408



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
                   Dec. 31,     Sept. 30,   Dec. 31,    Dec. 31,    Dec. 31,
                   2013         2013        2012        2013        2012
GAAP gross         $ 16,417     $ 15,878    $ 12,652    $ 58,828    $ 45,589
profit
Stock-based        73           73          74          292         298
compensation
Non-GAAP gross                                                  
profit
                   $ 16,490     $ 15,951    $ 12,726    $ 59,120    $ 45,887
GAAP gross
profit as          81.7%        84.4%       83.2%       83.0%       83.3%
percentage of
revenues
Non-GAAP gross                                                  
profit as
percentage of      82.1%        84.8%       83.7%       83.4%       83.9%
revenues
GAAP operating     $ 10,450     $ 9,837     $ 8,400     $ 39,178    $ 32,370
expenses
Stock-based
compensation:
Research      (2,045)      (2,044)     (1,563)     (7,963)     (6,026)
and development
Selling,
general and        (1,515)      (1,425)     (1,265)     (5,665)     (4,874)
administrative
Amortization of
intangible
assets:
Selling,
general and        --           --          (51)        --          (204)
administrative
Non-GAAP
operating          $ 6,890      $ 6,368     $ 5,521     $ 25,550    $ 21,266
expenses
GAAP operating     $ 5,967      $ 6,041     $ 4,252     $ 19,650    $ 13,219
income
Non-GAAP           $ 9,600      $ 9,583     $ 7,205     $ 33,570    $ 24,621
operating income
GAAP net income    $ 6,513      $ 6,528     $ 4,839     $ 21,698    $ 15,651
Stock-based        3,633        3,542       2,902       13,920      11,198
compensation
Amortization of
purchased          --           --          51          --          204
intangible
assets
Non-GAAP net       $ 10,146     $ 10,070    $ 7,792     $ 35,618    $ 27,053
income
Non-GAAP net                                                        
income per share   $ 0.34       $ 0.33      $ 0.26      $ 1.18
- Diluted                                                           $ 0.92
Non-GAAP                                                        
weighted average
shares -           30,213,501   30,164,874  29,634,765  30,074,563  29,473,851
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)
                                             December 31,      December 31,
                                             2013              2012
                                             (Unaudited)       (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable           $   202,865    $   167,968
securities and deposits
Trade receivables, net                       7,416             4,813
Other receivables                            3,153             4,305
Inventories                                  5,969             4,523
Total current assets                         219,403           181,609
NON CURRENT ASSETS:
Severance pay fund                           7,416             6,066
Long term investment and others              364               358
Total non current assets                     7,780             6,424
PROPERTY AND EQUIPMENT, NET                  2,114             1,285
INTANGIBLE ASSETS, NET                       4,127             1,000
GOODWILL                                     96,276            96,276
TOTAL ASSETS                                 $   329,700    $   286,594
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables                               $     3,951  $      571
Other payables and accrued expenses          7,309             5,401
Total current liabilities                    11,260            5,972
ACCRUED SEVERANCE PAY                        8,164             6,977
SHAREHOLDERS'  EQUITY:
Share capital                                164               161
Additional paid-in capital                   328,003           312,723
Accumulated other comprehensive income       437               787
Accumulated deficit                          (18,328)          (40,026)
Total shareholders' equity                   310,276           273,645
TOTAL LIABILITIES AND SHAREHOLDERS'  EQUITY  $    329,700  $    286,594



EZchip Semiconductor Ltd.
Selected Condensed Consolidated Cash Flow Data on a Non-GAAP Basis
(U.S. Dollars in thousands)
(Unaudited)
                         Three Months Ended               Twelve Months Ended
                         Dec. 31,   Sept. 30,  Dec. 31,   Dec. 31,   Dec. 31,
                         2013       2013       2012       2013       2012
Cash flows from
operating activities:
Net income               $        $        $       $        $  
                         6,513      6,528      4,839      21,698     15,651
Adjustments to
reconcile net income to
net cash provided by
operating activities:
Depreciation and         161        158        183        603        661
amortization
Decrease (increase) in                                           
trade and other
receivables, net         1,026      (2,083)    (1,852)    (1,198)    2,331
Decrease (increase) in   (678)      584        948        (1,446)    1,265
inventory
Increase (decrease) in                                           
trade payables and
other accrued            2,199      1,605      138        3,990      (1,400)
liabilities, net
Stock-based
compensation             3,633      3,542      2,902      13,920     11,198


Net cash provided by     12,854     10,334     7,158      37,567     29,706
operating activities
Cash flows from
investing activities:
Purchase of property     (151)      (846)      (239)      (1,597)    (1,008)
and equipment
Purchase of technology   (533)      (1,163)    --         (1,827)    (500)
Net cash used in         (684)      (2,009)    (239)      (3,424)    (1,508)
investing activities
Cash flows from
financing activities:
Proceeds from exercise   79         450        1,027      1,363      12,890
of options
Net cash provided by     79         450        1,027      1,363      12,890
financing activities
Cash adjustment of
marketable securities,   (14)       (20)       (59)       (609)      110
net*
Increase in cash, cash
equivalents, marketable  12,235     8,755      7,887      34,897     41,198
securities and deposits
Cash, cash equivalents,
marketable securities    190,630    181,875    160,081    167,968    126,770
and deposits at the
beginning of the period
Cash, cash equivalents,
marketable securities    $ 202,865  $ 190,630  $ 167,968  $ 202,865  $ 167,968
and deposits at the end
of the period
* 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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