Fourth quarter revenues expected to decline due to temporary inventory adjustments across several key customers(PRNewswire) — EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in high-performance processing solutions for carrier and data center networks, today announced its results for the third quarter ended September 30, 2015.
Third Quarter 2015 Highlights:
- Third quarter revenues of $30.7 million
- Gross margin reached 75.2% on a non-GAAP basis
- Gross margin reached 74.1% on a GAAP basis
- Net income was $11.5 million on a non-GAAP basis
- Net income was $5.2 million on a GAAP basis
- Operating cash flow of $12.2 million
- Net cash at end of quarter was $200.4 million
Third Quarter 2015 Results
Total revenues in the third quarter of 2015 were $30.7 million, an increase of 60% compared to $19.2 million in the third quarter of 2014, and an increase of 9% compared to $28.3 million in the second quarter of 2015.
Net income, on a GAAP basis, for the third quarter of 2015 was $5.2 million, or $0.17 per share (diluted), compared to net income of $4.2 million, or $0.14 per share (diluted), in the third quarter of 2014, and net income of $5.4 million, or $0.18 per share (diluted), in the second quarter of 2015.
Net income, on a non-GAAP basis, for the third quarter of 2015 was $11.5 million, or $0.36 per share (diluted), compared to non-GAAP net income of $8.5 million, or $0.28 per share (diluted), in the third quarter of 2014, and non-GAAP net income of $10.9 million, or $0.34 per share (diluted), in the second quarter of 2015.
Cash, cash equivalents, marketable securities and deposits as of September 30, 2015, totaled $200.4 million, compared to $189.0 million as of June 30, 2015. Cash generated from operations was $12.2 million, cash used in investing activities was $1.3 million, cash generated from financing activities was $0.6 million (resulting from the exercise of options), and a decrease of $0.1 million resulted from cash adjustment of marketable securities, net.
First Nine Months 2015 Results
Total revenues for the nine months ended September 30, 2015 were $85.9 million, a year-over-year increase of 39% compared to $61.6 million for the nine months ended September 30, 2014. Net income on a GAAP basis for the nine months ended September 30, 2015 was $2.4 million, which includes a one-time charge due to early repayment of $9.6 million to the Israeli Office of Chief Scientist (OCS), or $0.08 per share (diluted), compared to net income of $16.5 million, or $0.56 per share (diluted), for the nine months ended September 30, 2014. Net income on a non-GAAP basis for the nine months ended September 30, 2015 was $29.9 million or $0.94 per share (diluted), compared with non-GAAP net income of $29.6 million, or $0.96 per share (diluted), for the nine months ended September 30, 2014.
Fourth Quarter 2015 Outlook
With respect to guidance for the fourth quarter of 2015, the Company expects revenues to be approximately $25 million due to near-term inventory adjustments across several key customers that are serving the carrier networking space. The Company believes that this slowdown does not reflect the long-term outlook for the Company's performance nor the underlying business.
Eli Fruchter, CEO of EZchip, commented,
"We are pleased with our third quarter results, which reflected an increase in revenues and net income both sequentially and year over year. Heading into the fourth quarter, we expect a near-term slow-down in revenue. We believe it is important that shareholders have the most updated outlook when making significant decisions about the future of their investment in EZchip."
Commenting on the pending transaction with Mellanox, Mr. Fruchter continued,
"As EZchip's founder and largest individual shareholder, I, together with the entire EZchip Board, urge shareholders to vote FOR the transaction with Mellanox at the upcoming Annual General Meeting.
"The fully financed, all-cash, $25.50 per share offer from Mellanox provides EZchip shareholders with immediate and certain cash value. This is in contrast to the headwinds a standalone EZchip could face as we continue to witness further industry consolidation and the moves of major customers toward in-house production for NPS-400 functionality. The EZchip Board has carefully managed the Company's sale process to secure what it believes is in the best interests of EZchip's shareholders. We remain confident that this transaction is in the best interest of our shareholders, as well as our customers, our employees and our Company."
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, acquisition related costs, amortization of purchased intangible assets and one-time charge due to early repayment of OCS grants. 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 high-performance processing solutions for a wide range of applications for the carrier, cloud and data center networks. EZchip's broad portfolio of solutions scales from a few to hundreds of Gigabits-per-second, and includes network processors, multi-core processors, intelligent network adapters, high-performance appliances and a comprehensive software ecosystem. EZchip's processing solutions excel at providing great flexibility and high performance coupled with superior integration and power efficiency. For more information on our company, visit the web site at http://www.ezchip.com .