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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