Quantcast
Last updated on April 16, 2014 at 12:34 EDT

EZchip Announces Second Quarter 2012 Results

August 8, 2012

YOKNEAM, Israel, August 8, 2012 /PRNewswire/ –

EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors,
today announced its results for the second quarter ended June 30, 2012.

Second Quarter 2012 Highlights:

        - Second quarter revenues of $15.8 million
        - Gross margin reached 81.7% on a GAAP basis and 82.2% on a non-GAAP basis
        - Net income was $5.6 million on a GAAP basis, 35% of revenues
        - Net income was $8.4 million on a non-GAAP basis, 53% of revenues
        - Operating cash flow of $9.1 million
        - End of quarter net cash was $153.8 million

Second Quarter 2012 Results:

Total revenues in the second quarter of 2012 were $15.8 million, a decrease of 9%
compared to $17.3 million in the second quarter of 2011, and an increase of 10% compared
to $14.4 million in the first quarter of 2012.

Net income, on a GAAPbasis, for the second quarter of 2012 was $5.6 million, or $0.19
per share (diluted), compared to net income of $4.8 million, or $0.17 per share (diluted),
in the second quarter of 2011, and net income of $5.1 million, or $0.18 per share
(diluted), in the first quarter of 2012.

Net income, on a non-GAAP basis, for the second quarter of 2012 was $8.4 million, or
$0.29 per share (diluted), compared to non-GAAP net income of $9.4 million, or $0.33 per
share (diluted), in the second quarter of 2011, and non-GAAP net income of $7.8 million,
or $0.27 per share (diluted), in the first quarter of 2012.

Cash, cash equivalents, marketable securities and deposits as of June 30, 2012,
totaled $153.8 million, compared to $145.2 million as of March 31, 2012. Cash generated
from operations during the second quarter was $9.1 million, cash used in investing
activities was $0.8 million and cash provided by financing activities (resulting from the
exercise of options) was $0.3 million.

First Six Months 2012 Results

Total revenues for the six months ended June 30, 2012 were $30.2 million, a
year-over-year decrease of 1% compared to $30.5 million for the six months ended June 30,
2011. Net income on a GAAP basis for the six months ended June 30, 2012 was $10.7 million,
or $0.37 per share (diluted), compared to net income of $6.2 million, or $0.22 per share
(diluted), for the six months ended June 30, 2011. Net income on a non-GAAP basis for the
six months ended June 30, 2012 was $16.2 million or $0.55 per share (diluted), compared
with non-GAAP net income of $14.8 million, or $0.52 per share (diluted), for the six
months ended June 30, 2011.

Eli Fruchter, CEO of EZchip, commented, “In the second quarter of 2012 we continued to
make progress in the marketplace. Cisco moved a second NP-4 based platform to production
and ZTE became our second largest customer with strong NP-3 based purchases and a
significant increase in initial production shipments of NP-4 based systems, and has
started NP-5 designs. Our other NP-4 customers are still at the design phase with NP-4 and
are still using the large amounts of samples they purchased last year to complete their
systems testing and move to production. We believe that it might take these customers a
longer time to go to production than we originally anticipated, partially because they are
new to our technology and need more time for software development but also due to the
global economy worries that slow up carriers CAPEX and which are likely to remain low
during the second half of 2012. We believe this environment allows our new NP-4 based
customers not to rush their next generation systems and continue to sell their older
systems.

Revenues in the second half of 2012, as a result, are expected to be lower than
initially anticipated with a significant sequential decline in the third quarter and with
2012 revenues likely to decline year-over-year. However, we continue to believe in our
long-term, strong growth potential and are now expecting the revenue ramp to start in
2013.

It is a very disappointing short term guidance that delays our expected revenue ramp,
but we believe it is just a delay that does not change our long term view. We continue to
believe that all our NP-4 customers will move to production until the end of the year,
carriers to increase spending, the growth in edge routing to resume, and our leadership in
high speed network processors to advance.”

Conference Call

The Company will be hosting a conference call later today, August 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 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 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                  Six Months Ended
                          ---------------------------------------   -------------------------
                             June 30,     March 31,      June 30,      June 30,      June 30,
                               2012          2012          2011          2012          2011
                          -----------   -----------   -----------   -----------   -----------
        Revenues            $ 15,798      $ 14,415      $ 17,306      $ 30,213      $ 30,485
        Cost of revenues       2,887         2,179         3,535         5,066         6,514
        Amortization of
        purchased technology       -             -           298             -           597
                          -----------   -----------   -----------   -----------   -----------
        Gross profit          12,911        12,236        13,473        25,147        23,374
        Operating expenses:
        Research and
        development, net       4,840         4,534         3,892         9,374         8,291
        Selling, general
        and administrative     3,200         3,167         3,062         6,367         6,006
                          -----------   -----------   -----------   -----------   -----------
        Total operating
        expenses               8,040         7,701         6,954        15,741        14,297
                          -----------   -----------   -----------   -----------   -----------
        Operating income       4,871         4,535         6,519         9,406         9,077

        Financial income,
        net                      682           597           369         1,279           695
                          -----------   -----------   -----------   -----------   -----------
        Income before taxes    5,553         5,132         6,888        10,685         9,772
        Taxes on income            -            -         (2,116)            -        (3,527)

                          -----------   -----------   -----------   -----------   -----------
        Net income           $ 5,553       $ 5,132       $ 4,772      $ 10,685       $ 6,245
                          ===========   ===========   ===========   ===========   ===========
        Net income per share:
        Basic                 $ 0.20        $ 0.19        $ 0.18        $ 0.38        $ 0.24
        Diluted               $ 0.19        $ 0.18        $ 0.17        $ 0.37        $ 0.22
        Weighted average
        shares used in per
        share calculation:
        Basic             28,042,283    27,525,386    26,600,650    27,783,834    26,400,961
        Diluted           28,823,804    28,517,609    27,911,054    28,700,836    27,798,963

                          -----------   -----------   -----------   -----------   -----------

                                          EZchip Semiconductor Ltd.
                                  Reconciliation of GAAP to Non-GAAP Measures
                              (U.S. Dollars in thousands, except per share amounts)
                                                  (Unaudited)
                                      Three Months Ended                  Six Months Ended
                          ---------------------------------------   -------------------------
                             June 30,     March 31,      June 30,      June 30,      June 30,
                               2012          2012          2011          2012          2011
                          -----------   -----------   -----------   -----------   -----------
        GAAP gross profit   $ 12,911      $ 12,236      $ 13,473      $ 25,147      $ 23,374
        Stock-based
        compensation              74            77            73           151           213
        Amortization of
        purchased technology       -             -           298             -           597
                          -----------   -----------   -----------   -----------   -----------
        Non-GAAP gross
        profit              $ 12,985      $ 12,313      $ 13,844      $ 25,298      $ 24,184
                          ===========   ===========   ===========   ===========   ===========
        GAAP gross profit
        as percentage
        of revenues             81.7%         84.9%         77.9%         83.2%         76.7%
                          -----------   -----------   -----------   -----------   -----------
        Non-GAAP gross
        profit as
        percentage of
        revenues                82.2%         85.4%         80.0%         83.7%         79.3%

                          ===========   ===========   ===========   ===========   ===========
        GAAP operating
        expenses             $ 8,040       $ 7,701       $ 6,954      $ 15,741      $ 14,297
        Stock-based
        compensation:
          Research and
          development         (1,545)       (1,361)       (1,119)       (2,906)       (2,245)
          Selling, general
          and administrative  (1,216)       (1,144)         (908)       (2,360)       (1,738)
        Amortization of
        intangible assets
          Selling, general
          and administrative     (51)          (51)          (95)         (102)         (190)
                          -----------   -----------   -----------   -----------   -----------
        Non-GAAP
        operating
        expenses             $ 5,228       $ 5,145       $ 4,832      $ 10,373      $ 10,124
                          ===========   ===========   ===========   ===========   ===========
        GAAP operating
        income               $ 4,871       $ 4,535       $ 6,519       $ 9,406       $ 9,077
                          -----------   -----------   -----------   -----------   -----------
        Non-GAAP
        operating
        income               $ 7,757       $ 7,168       $ 9,012      $ 14,925      $ 14,060
                          ===========   ===========   ===========   ===========   ===========
        GAAP net income      $ 5,553       $ 5,132       $ 4,772      $ 10,685       $ 6,245
        Stock-based
        compensation           2,835         2,582         2,100         5,417         4,196
        Amortization
        of purchased
        intangible assets         51            51           393           102           787
        Taxes on income*           -             -         2,116             -         3,527
                          -----------   -----------   -----------   -----------   -----------
        Non-GAAP net
        income               $ 8,439       $ 7,765       $ 9,381      $ 16,204      $ 14,755
                          ===========   ===========   ===========   ===========   ===========
        Non-GAAP net
        income per share
        - Diluted             $ 0.29        $ 0.27        $ 0.33        $ 0.55        $ 0.52
        Non-GAAP weighted
        average shares
        - Diluted**       29,540,537    29,144,661    28,455,818    29,343,540    28,297,526

        * 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)
                                                         June 30,       December 31,
                                                           2012             2011
                                                       ------------     ------------
                                                       (Unaudited)       (Audited)
        ASSETS
        CURRENT ASSETS:
        Cash, cash equivalents, marketable
        securities and deposits                         $ 153,764        $ 126,770
        Trade receivables, net                              5,215            8,655
        Other receivables                                   4,524            1,837
        Inventories                                         5,992            5,788
                                                       ------------     ------------
        Total current assets                              169,495          143,050
        NON CURRENT ASSETS:
        Severance pay fund                                  5,472            5,215
        Long term investment and others                       333              337
                                                       ------------     ------------
        Total non current assets                            5,805            5,552
        PROPERTY AND EQUIPMENT, NET                         1,090              828
        INTANGIBLE ASSETS, NET                              1,103            1,205
        GOODWILL                                           96,276           96,276
                                                       ------------     ------------
        TOTAL ASSETS                                    $ 273,769        $ 246,911
                                                       ============     ============
        LIABILITIES AND SHAREHOLDERS' EQUITY
        CURRENT LIABILITIES:
        Trade payables                                      $ 746          $ 2,319
        Other payables and accrued expenses                 6,028            6,352
                                                       ------------     ------------
        Total current liabilities                           6,774            8,671
        ACCRUED SEVERANCE PAY                               6,443            6,081
        SHAREHOLDERS' EQUITY:
        Share capital                                         160              155
        Additional paid-in capital                        305,820          288,641
        Accumulated other comprehensive loss                 (436)            (960)
        Accumulated deficit                               (44,992)         (55,677)
                                                       ------------     ------------
        Total shareholders' equity                        260,552          232,159
                                                       ------------     ------------
        TOTAL LIABILITIES AND SHAREHOLDERS'
        EQUITY                                          $ 273,769        $ 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                  Six Months Ended
                          ---------------------------------------   -------------------------
                             June 30,     March 31,      June 30,      June 30,      June 30,
                               2012          2012          2011          2012          2011
                          -----------   -----------   -----------   -----------   -----------
        Cash flows from
        operating
        activities:
        Net income           $ 5,553       $ 5,132       $ 4,772      $ 10,685       $ 6,245
        Adjustments to
        reconcile net income
        to net cash provided
        by operating
        activities:
        Depreciation and
        amortization             157           143           452           300           902
        Decrease (increase)
        in trade and other
        receivables, net          76           681          (929)          757           366
        Decrease (increase)
        in inventory             974        (1,178)          (12)         (204)       (1,438)
        Decrease in
        deferred tax asset         -             -         2,110             -         3,513
        Increase (decrease)
        in trade payables and
        other accrued
        liabilities, net        (490)         (463)          674          (953)          289
        Stock-based
        compensation           2,835         2,582         2,100         5,417         4,196

                          -----------   -----------   -----------   -----------   -----------
        Net cash provided
        by operating
        activities             9,105         6,897         9,167        16,002        14,073
                          -----------   -----------   -----------   -----------   -----------
        Cash flows from
        investing activities:
        Purchase of property
        and equipment           (338)         (336)          (51)         (674)         (176)
        Purchase of
        technology              (500)            -             -          (500)            -
                          -----------   -----------   -----------   -----------   -----------
        Net cash used in
        investing activities    (838)         (336)          (51)       (1,174)         (176)
                          -----------   -----------   -----------   -----------   -----------
        Cash flows from
        financing activities:
        Proceeds from
        exercise of options      352        11,415         3,432        11,767         5,905

                          -----------   -----------   -----------   -----------   -----------
        Net cash provided
        by financing
        activities               352        11,415         3,432        11,767         5,905
                          -----------   -----------   -----------   -----------   -----------
        Unrealized gain
        (loss) on marketable
        securities, net          (79)          478             9           399           (82)
                          -----------   -----------   -----------   -----------   -----------
        Increase in cash, cash
        equivalents,
        marketable securities
        and deposits           8,540        18,454        12,557        26,994        19,720
        Cash, cash
        equivalents,
        marketable securities
        and deposits at
        the beginning of
        the period           145,224       126,770       108,473       126,770       101,310

                          -----------   -----------   -----------   -----------   -----------
        Cash, cash
        equivalents,
        marketable
        securities and
        deposits at the
        end of the period  $ 153,764     $ 145,224     $ 121,030     $ 153,764     $ 121,030
                          ===========   ===========   ===========   ===========   ===========

        Contact:

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

SOURCE EZchip Semiconductor Ltd


Source: PR Newswire