EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the first quarter ended March 31, 2012.
First Quarter 2012 Highlights:
- First quarter revenues of $14.4 million
- Gross margin reached 84.9% on a GAAP basis and 85.4% on a non-GAAP basis
- Net income was $5.1 million on a GAAP basis, 36% of revenues
- Net income was $7.8 million on a non-GAAP basis, 54% of revenues
- Operating cash flow of $6.9 million
- End of quarter net cash was $145.2 million
First Quarter 2012 Results:
Total revenues in the first quarter of 2012 were $14.4 million, an increase of 9% compared to $13.2 million in the first quarter of 2011, and an increase of 1% compared to $14.3 million in the fourth quarter of 2011.
Net income, on a GAAP basis, for the first quarter of 2012 was $5.1 million, or $0.18 per share (diluted), compared to net income of $1.5 million, or $0.05 per share (diluted), in the first quarter of 2011, and a net loss of $6.0 million, or $0.22 per share, in the fourth quarter of 2011, which included a one-time charge due to early repayment of $9.9 million to the Israeli Office of Chief Scientist (OCS).
Net income, on a non-GAAP basis, for the first quarter of 2012 was $7.8 million, or $0.27 per share (diluted), compared to non-GAAP net income of $5.4 million, or $0.19 per share (diluted), in the first quarter of 2011, and non-GAAP net income of $6.3 million, or $0.22 per share (diluted), in the fourth quarter of 2011.
Cash, cash equivalents and marketable securities as of March 31, 2012, totaled $145.2 million, compared to $126.8 million as of December 31, 2011. Cash generated from operations during the first quarter was $6.9 million, cash used in investing activities was $0.3 million, cash provided by financing activities (resulting from the exercise of options) was $11.4 million and an increase of $0.4 million resulted from unrealized gain on marketable securities.
Eli Fruchter, CEO of EZchip, commented, "The first quarter of 2012 was the first full quarter of NP-4 production shipments and a record quarter in sales to our largest customer Cisco, resulting in an outstanding 85.4% non-GAAP gross margin and 54% non-GAAP net income margin. Cisco is the first customer in production with one NP-4 based platform, and we expect more NP-4 based platforms and additional customers to move to production in the coming months. Several of our NP-4 customers are now starting their NP-5 designs and we continue to believe that substantially all our NP-4 customers will select the NP-5 for their next generation platforms, making our NP-4 and NP-5 the leading merchant NPUs in edge routing for years to come. During the quarter Infonetics Research updated its Carrier Ethernet Equipment market forecast, which presents a very healthy growth rate in edge routing, EZchip's main market, with the number of ports expected to triple by 2016, making it the fastest growing carrier Ethernet market segment."
"During the quarter we continued to make good progress with our new product development in Kiryat Gat and we expect approximately half of our R&D expenses towards the end of 2012 to be spent on that product line, up from approximately 25% last year. We believe that we are building an extremely competitive, strongly differentiated product that will open new markets for EZchip and the initial feedback from customers is extremely positive."
Conference Call
The Company will be hosting a conference call later today, May 9, 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, one-time charge due to early repayment of OCS grants 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
---------------------------------------
March 31, December 31, March 31,
2012 2011 2011
---------- ------------- ----------
Revenues $ 14,415 $ 14,269 $ 13,179
Cost of revenues 2,179 3,386 2,979
Amortization of
purchased technology -- -- 299
Repayment of OCS
grants -- 9,938 --
---------- ---------- ----------
12,236 945 9,901
Gross profit
Operating expenses:
Research and
development, net 4,534 4,352 4,399
Selling, general and
administrative 3,167 3,097 2,944
---------- ---------- ----------
Total operating
expenses 7,701 7,449 7,343
---------- ---------- ----------
Operating income 4,535 (6,504) 2,558
(loss)
Financial income,
net 597 551 326
---------- ---------- ----------
Income (loss) before
taxes 5,132 (5,953) 2,884
-- --
Taxes on income (1,411)
---------- ---------- ----------
Net income (loss) $ 5,132 $ (5,953) $ 1,473
========== ========== ==========
Net income (loss)
per share:
Basic $ 0.19 $ (0.22) $ 0.06
Diluted $ 0.18 $ (0.22) $ 0.05
Weighted average
shares used in per
share calculation:
Basic 27,525,386 27,015,478 26,199,053
Diluted 28,517,609 27,015,478 27,495,138
------------ ----------- ----------
EZchip Semiconductor Ltd.
Reconciliation of GAAP to Non-GAAP Measures
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
---------------------------------------
March 31, December 31, March 31,
2012 2011 2011
---------- ------------- ----------
GAAP gross profit $ 12,236 $ 945 $ 9,901
Stock-based compensation 77 73 140
Amortization of purchased
technology -- -- 299
Repayment of OCS grants* -- 9,938 --
---------- ------------- ----------
Non-GAAP gross profit $ 12,313 $ 10,956 $ 10,340
---------- ------------- ----------
GAAP gross profit as
percentage of revenues 84.9% 6.6% 75.1%
---------- ------------- ----------
Non-GAAP gross profit as
percentage of revenues 85.4% 76.8% 78.5%
---------- ------------- ----------
GAAP operating expenses $ 7,701 $ 7,449 $ 7,343
Stock-based compensation:
Research and development (1,361) (1,094) (1,126)
Selling, general and
administrative (1,144) (1,051) (830)
Amortization of intangible
assets
Selling, general and
administrative (51) (95) (95)
---------- ------------- ----------
Non-GAAP operating
expenses $ 5,145 $ 5,209 $ 5,292
---------- ------------- ----------
GAAP operating income
(loss) $ 4,535 $ (6,504) $ 2,558
---------- ------------- ----------
Non-GAAP operating income $ 7,168 $ 5,747 $ 5,048
---------- ------------- ----------
GAAP net income (loss) $ 5,132 $ (5,953) $ 1,473
Stock-based compensation 2,582 2,218 2,096
Amortization of purchased
intangible assets 51 95 394
Repayment of OCS grants* -- 9,938 --
Taxes on income** -- -- 1,411
---------- ------------- ----------
Non-GAAP net income $ 7,765 $ 6,298 $ 5,374
---------- ------------- ----------
Non-GAAP net income per
share - Diluted $ 0.27 $ 0.22 $ 0.19
Non-GAAP weighted average
shares - Diluted*** 29,144,661 28,605,559 28,003,376
* During December 2011 we made a one-time early payment of
$9.9 million to the Israeli Office of Chief Scientist,
representing the full balance of the contingent liability
related to the NP-4 and NPA grants received. Upon making
this payment, we have eliminated all future royalty
obligations related to our anticipated NP-4 and NPA revenues
and saved the associated future interest payments related to
such obligations. This amount was excluded from the non-GAAP
statements of operations as it represents future royalty
obligations.
** 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)
March 31, December 31,
2012 2011
----------- -----------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and
marketable securities $ 145,224 $ 126,770
Trade receivables, net 5,807 8,655
Other receivables 4,015 1,837
Inventories 6,966 5,788
--------- ----------
Total current assets 162,012 143,050
NON CURRENT ASSETS:
Severance pay fund 5,582 5,215
Long term investment and others 340 337
--------- ----------
Total non current assets 5,922 5,552
PROPERTY AND EQUIPMENT, NET 786 828
INTANGIBLE ASSETS, NET 1,154 1,205
GOODWILL 96,276 96,276
--------- ----------
TOTAL ASSETS $ 266,150 $ 246,911
========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Trade payables $ 1,355 $ 2,319
Other payables and accrued
expenses 5,880 6,352
--------- ----------
Total current liabilities 7,235 8,671
ACCRUED SEVERANCE PAY 6,637 6,081
SHAREHOLDERS' EQUITY:
Share capital 160 155
Additional paid-in capital 302,647 288,641
Accumulated other comprehensive
income (loss) 16 (960)
Accumulated deficit (50,545) (55,677)
--------- ----------
Total shareholders' equity 252,278 232,159
--------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 266,150 $ 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
------------------------------------
March 31, December 31, March 31,
2012 2011 2011
--------- ----------- ---------
Cash flows from operating
activities:
Net income (loss) $ 5,132 $(5,953) $ 1,473
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Repayment of OCS grants* -- 9,938 --
Depreciation and amortization 143 163 450
Decrease in trade and other
receivables, net 681 1,113 1,295
Decrease (increase) in
inventory (1,178) 259 (1,426)
Decrease in deferred tax asset -- -- 1,403
Increase (decrease) in trade
payables and other accrued
liabilities, net (463) 1,213 (385)
Stock-based compensation 2,582 2,218 2,096
-------- ------- -------
Net cash provided by operating
activities 6,897 8,951 4,906
-------- ------- -------
Cash flows from investing
activities:
Purchase of property and
equipment (336) (97) (125)
Purchase of technology
-- (500) --
-------- ------- -------
Net cash used in investing
activities (336) (597) (125)
-------- ------- -------
Cash flows from financing
activities:
Proceeds from exercise of
options
11,415 711 2,473
-------- ------- -------
Net cash provided by financing
activities 11,415 711 2,473
-------- ------- -------
Repayment of OCS grants* -- (9,938) --
Unrealized gain (loss) on
marketable securities, net 478 6 (91)
-------- ------- -------
Increase (decrease) in cash,
cash equivalents and marketable
securities 18,454 (867) 7,163
Cash, cash equivalents and
marketable securities at the
beginning of the period 126,770 127,637 101,310
-------- ------- -------
Cash, cash equivalents and
marketable securities at the
end of the period $ 145,224 $126,770 $ 108,473
======== ======== ========
* During December 2011 we made a one-time early payment of $9.9 million to the Israeli Office of Chief Scientist, representing the full balance of the contingent liability related to the NP-4 and NPA grants received. Upon making this payment, we have eliminated all future royalty obligations related to our anticipated NP-4 and NPA revenues and saved the associated future interest payments related to such obligations. This amount was excluded from the non-GAAP operating cash flow as it represents future royalty obligations.
Contact:
Ehud Helft / Kenny Green
CCG Investor Relations
Email Contact
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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