YOKNEAM, Israel, November 2, 2011 /PRNewswire/ --
EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the third quarter ended September 30, 2011.
Third Quarter 2011 Highlights:
- Third quarter revenues increased 14% year-over-year and 8% sequentially, reaching $18.7 million
- Gross margin reached 75.9% on a GAAP basis and 76.3% on a non-GAAP basis
- Net income was $7.7 million on a GAAP basis, 41% of revenues
- Net income was $9.9 million on a non-GAAP basis, 53% of revenues
- Operating cash flow of $5.8 million
- End of quarter net cash was $127.6 million
ThirdQuarter 2011 Results:
Total revenues in the third quarter of 2011 were $18.7 million, an increase of 14% compared to $16.4 million in the third quarter of 2010, and an increase of 8% compared to $17.3 million in the second quarter of 2011.
Net income, on a GAAPbasis, for the third quarter of 2011 was $7.7 million, or $0.27 per share (diluted), compared to net income of $4.5 million, or $0.17 per share (diluted), in the third quarter of 2010, and net income of $4.8 million, or $0.17 per share (diluted), in the second quarter of 2011.
Net income, on a non-GAAP basis, for the third quarter of 2011 was $9.9 million, or $0.35 per share (diluted), compared to non-GAAP net income of $8.7 million, or $0.32 per share (diluted), in the third quarter of 2010, and non-GAAP net income of $9.4 million, or $0.33 per share (diluted), in the second quarter of 2011.
Cash, cash equivalents and marketable securities as of September 30, 2011, totaled $127.6 million, compared to $121.0 million as of June 30, 2011. Cash generated from operations during the third quarter was $5.8 million, cash used in investing activities was $0.2 million, cash provided by financing activities (resulting from the exercise of options) was $1.5 million and a decrease of $0.5 million resulted from unrealized loss on marketable securities.
First Nine Months 2011 Results
Total revenues for the nine months ended September 30, 2011 were $49.2 million, a year-over-year increase of 10% compared to $44.9 million for the nine months ended September 30, 2010. Net income on a GAAP basis for the nine months ended September 30, 2011 was $13.9 million, or $0.50 per share (diluted), compared to net income of $9.6 million, or $0.37 per share (diluted), for the nine months ended September 30, 2010. Net income on a non-GAAP basis for the nine months ended September 30, 2011 was $24.7 million or $0.87 per share (diluted), compared with non-GAAP net income of $21.8 million, or $0.82 per share (diluted), for the nine months ended September 30, 2010.
Eli Fruchter, CEO of EZchip, commented, "The third quarter of 2011 was another record quarter for EZchip, including achieving an outstanding 53% non-GAAP net income margin.
NP-4 continues to make good progress and we expect to start shipping production chips to our customers this quarter. During the first three quarters of 2011 we shipped a large number of
NP-4 samples to our customers - several times the number of NP-3 samples shipped in the comparable NP-3 sampling time period, and double the number of NP-3 chips shipped in the first full production year of NP-3. We believe this is a very strong indication of the revenue potential of NP-4 in the coming years.
"For the near term, the recent mixed market signals combined with discussions of a possible recession are leading contract manufacturers to reduce inventories. Based on current, very preliminary indications, we expect revenues in the fourth quarter of 2011 to decline by 25%-30% compared to the third quarter of 2011. We believe that over the long term, Service Providers will continue to invest in Carrier Ethernet, which will drive demand for our products."
Conference Call
The Company will be hosting a conference call later today, November 2, 2011, at 10:00am ET, 7:00am PT, 3:00pm UK time and 4:00pm 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 intend 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 call, a replay of the call 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 benefit (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 31, 2011, as amended on September 27, 2011, 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,
2011 2011 2010 2011 2010
-------- --------- --------- --------- ---------
Revenues $ 18,703 $ 17,306 $ 16,377 $ 49,188 $ 44,862
Cost of
revenues 4,509 3,535 3,833 11,023 11,207
Amortization
of purchased
technology -- 298 471 597 1,462
-------- ---------- ---------- -------- --------
14,194 13,473 12,073 37,568 32,193
Gross profit
Operating
expenses:
Research and
development,
net 4,052 3,892 3,177 12,343 10,088
Selling,
general and
administrative 2,956 3,062 2,651 8,962 7,384
--------- -------- --------- -------- --------
Total
operating
expenses 7,008 6,954 5,828 21,305 17,472
--------- -------- --------- -------- --------
Operating 7,186 6,519 6,245 16,263 14,721
income
Financial
income, net 467 369 299 1,162 818
--------- -------- --------- -------- --------
Income before
taxes 7,653 6,888 6,544 17,425 15,539
Taxes on 3 2,116 2,043 3,530 5,922
--------- -------- --------- -------- --------
income
Net income $ 7,650 $ 4,772 $ 4,501 $ 13,895 $ 9,617
========= ======== ========= ======== ========
Net income per
share:
Basic $ 0.28 $ 0.18 $ 0.18 $ 0.52 $ 0.38
Diluted $ 0.27 $ 0.17 $ 0.17 $ 0.50 $ 0.37
Weighted
average shares
used in per
share
calculation:
Basic 26,900,439 26,600,650 25,421,522 26,569,283 25,080,837
Diluted 28,046,688 27,911,054 26,524,702 27,912,322 25,810,870
----------- ---------- ----------- ---------- ----------
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 June September September September
30, 30, 30, 30, 30,
2011 2011 2010 2011 2010
----------- ------- ---------- --------- ---------
GAAP gross
profit $ 14,194 $ 13,473 $ 12,073 $ 37,568 $ 32,193
Stock-based
compensation 73 73 58 286 169
Amortization
of purchased
technology -- 298 471 597 1,462
--------- -------- --------- -------- --------
Non-GAAP gross
profit $ 14,267 $ 13,844 $ 12,602 $ 38,451 $ 33,824
--------- -------- --------- -------- --------
GAAP gross
profit as
percentage of
revenues 75.9% 77.9% 73.7% 76.4% 71.8%
--------- -------- --------- -------- --------
Non-GAAP gross
profit as
percentage of
revenues 76.3% 80.0% 76.9% 78.2% 75.4%
--------- -------- --------- -------- --------
GAAP operating
expenses $ 7,008 $ 6,954 $ 5,828 $ 21,305 $ 17,472
Stock-based
compensation:
Research and
development (1,107) (1,119) (754) (3,352) (2,159)
Selling,
general and
administrative (1,012) (908) (677) (2,750) (1,870)
Amortization
of intangible
assets
Selling,
general and
administrative (95) (95) (194) (285) (580)
--------- -------- --------- -------- --------
Non-GAAP
operating
expenses $ 4,794 $ 4,832 $ 4,203 $ 14,918 $ 12,863
--------- -------- --------- -------- --------
GAAP operating
income $ 7,186 $ 6,519 $ 6,245 $ 16,263 $ 14,721
--------- -------- --------- -------- --------
Non-GAAP
operating
income $ 9,473 $ 9,012 $ 8,399 $ 23,533 $ 20,961
--------- -------- --------- -------- --------
GAAP net
income $ 7,650 $ 4,772 $ 4,501 $ 13,895 $ 9,617
Stock-based
compensation 2,192 2,100 1,489 6,388 4,198
Amortization
of purchased
intangible
assets 95 393 665 882 2,042
Taxes on
income* 3 2,116 2,043 3,530 5,922
--------- -------- --------- -------- --------
Non-GAAP net
income $ 9,940 $ 9,381 $ 8,698 $ 24,695 $ 21,779
--------- -------- --------- -------- --------
Non-GAAP net
income per
share -
Diluted $ 0.35 $ 0.33 $ 0.32 $ 0.87 $ 0.82
Non-GAA
weighted
average shares
- Diluted** 28,577,753 28,455,818 27,130,452 28,381,465 26,427,024
* 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. Once the Company completes the utilization of the deferred tax asset, the Company expects to be exempt from Israeli companies taxes for a period of ten years due to benefits provided to the Company pursuant to the Company's 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 30, December 31,
2011 2010
------------- -------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash
equivalents and
marketable
securities $ 127,637 $ 101,310
Trade receivables,
net 10,339 8,988
Other receivables 1,260 1,178
Inventories 6,047 4,522
Deferred tax
assets, net -- 3,443
---------- ----------
Total current
assets 145,283 119,441
NON CURRENT
ASSETS:
Severance pay fund 5,185 5,209
Long term
investment and
others 343 335
---------- ----------
Total non current
assets 5,528 5,544
PROPERTY AND
EQUIPMENT, NET 510 419
Goodwill 96,276 96,276
Intangible assets,
net 300 1,181
---------- ----------
TOTAL ASSETS $ 247,897 $ 222,861
========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
CURRENT
LIABILITIES:
Trade payables $ 716 $ 1,289
Other payables and
accrued expenses 5,663 6,569
---------- ----------
Total current
liabilities 6,379 7,858
LONG TERM
LIABILITIES:
Accrued severance
pay 6,082 5,974
SHAREHOLDERS'
EQUITY:
Share capital 154 149
Additional paid-in
capital 285,713 271,959
Accumulated other
comprehensive
income (loss) (707) 540
Accumulated
deficit (49,724) (63,619)
---------- ----------
Total
shareholders'
equity 235,436 209,029
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $ 247,897 $ 222,861
========== ==========
EZchip Semiconductor Ltd.
Selected Condensed Consolidated Cash Flow Data
(U.S. Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------- --------------------
September June September September September
30, 30, 30, 30, 30,
2011 2011 2010 2011 2010
--------- -------- --------- --------- ---------
Cash flows
from
operating
activities:
Net income $ 7,650 $ 4,772 $ 4,501 $ 13,895 $ 9,617
Adjustments
to reconcile
net income
to net cash
provided by
operating
activities:
Depreciation
and
amortization 162 452 712 1,064 2,191
Decrease
(increase)
in trade and
other
receivables,
net (2,100) (929) (1,199) (1,734) 3,810
Increase in
inventory (87) (12) 922) (1,525) (2,076)
Decrease in
deferred tax
asset -- 2,110 2,011 3,513 5,859
Increase
(decrease)
in trade
payables and
other
accrued
liabilities,
net (1,996) 674 403 (1,707) (3,469)
Stock-based
compensation 2,192 2,100 1,489 6,388 4,198
-------- -------- ------- -------- --------
Net cash
provided by
operating
activities 5,821 9,167 6,995 19,894 20,130
-------- -------- ------- -------- --------
Cash flows
from
investing
activities:
Purchase of
property and
equipment (138) (51) (46) (314) (311)
Cash paid
for
investment
in
affiliated
Company -- -- (200) -- (200)
-------- -------- ------- -------- --------
Net cash
used in
investing
activities (138) (51) (246) (314) (511)
-------- -------- ------- -------- --------
Cash flows
from
financing
activities:
Proceeds
from
issuance of
share
capital -- -- -- -- 1,072
Proceeds
from
exercise of
options 1,466 3,432 2,795 7,371 5,098
-------- -------- ------- -------- --------
Net cash
provided by
financing
activities 1,466 3,432 2,795 7,371 6,170
-------- -------- ------- -------- --------
Unrealized
gain (loss)
on
marketable
securities,
net (542) 9 288 (624) 107
-------- -------- ------- -------- --------
Increase in
cash, cash
equivalents
and
marketable
securities 6,607 12,557 9,832 26,327 25,896
Cash, cash
equivalents
and
marketable
securities
at the
beginning of
the period 121,030 108,473 83,302 101,310 67,238
-------- -------- ------- -------- --------
Cash, cash
equivalents
and
marketable
securities
at the end
of the
period $ 127,637 $ 121,030 $ 93,134 $ 127,637 $ 93,134
========= ======== ======== ========= ========
Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
ezchip@ccgisrael.com
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd