First Quarter 2014 Highlights:
- First quarter revenues of $20.3 million
- Gross margin reached 81.3% on a GAAP basis and 81.7% on a non-GAAP basis
- Net income, on a GAAP basis, was $6.1 million (30% of revenues)
- Net income, on a non-GAAP basis, was $10.0 million (49% of revenues)
- Operating cash flow of $8.6 million
- Net cash at end of quarter was $210.0 million
First Quarter 2014 Results:
Total revenues in the first quarter of 2014 were $20.3 million, an increase of 33% compared to $15.3 million in the first quarter of 2013, and an increase of 1% compared to $20.1 million in the fourth quarter of 2013.
Net income, on a GAAP basis, for the first quarter of 2014 was $6.1 million, or $0.21 per share (diluted), compared to net income of $3.5 million, or $0.12 per share (diluted), in the first quarter of 2013, and net income of $6.5 million, or $0.22 per share (diluted), in the fourth quarter of 2013.
Net income, on a non-GAAP basis, for the first quarter of 2014 was $10.0 million, or $0.33 per share (diluted), compared to non-GAAP net income of $6.7 million, or $0.23 per share (diluted), in the first quarter of 2013, and non-GAAP net income of $10.1 million, or $0.34 per share (diluted), in the fourth quarter of 2013.
Cash, cash equivalents, marketable securities and deposits as of March 31, 2014, totaled $210.0 million, compared to $202.9 million as of December 31, 2013. Cash generated from operations was $8.6 million, cash used in investing activities was $1.6 million, cash provided by financing activities (resulting from the exercise of options) was $0.2 million and a decrease of $0.1 million resulted from cash adjustment of marketable securities, net.
Eli Fruchter, CEO of EZchip, commented, "This has been a record quarter for EZchip in revenues, up 33% compared to the first quarter last year. During the quarter we continued the testing of the NP-5 and expect the NP-5 to move to production in the second half of the year, in line with the typical three year gap we have seen between NP generations, starting with the NP-1 in 2002. Our upcoming NPS will double the throughput of its NP-5 predecessor and is expected to arrive sooner than the typical three year gap we have had with previous chip generations. This provides our routing customers with enough time to make their silicon choices into next year and still have ample time to migrate their software to the NPS and be ready with next gen line cards in the 2016/17 time frame. The NPS is receiving very positive feedback from our current customers as well as from vendors outside of the routing arena. Such vendors include data center network appliance and switch vendors as well as the large carriers and data center operators that are innovating in-house networking solutions including the adoption of the white box concept."
The Company will be hosting a conference call later today, May 14, 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. 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.
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 27, 2014 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.