YOKNEAM, Israel, February 13, 2013 /PRNewswire/ --
EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the fourth quarter and full year ended December 31, 2012.
Fourth Quarter and Full Year 2012 Highlights:
- Annual revenues for 2012 of $54.7 million
- Fourth quarter revenues of $15.2 million
- Fourth quarter gross margin reached 83.2% on a GAAP basis and 83.7% on a non-GAAP basis
- Net income, on a GAAP basis, was $15.7 million for 2012 and $4.8 million for the fourth quarter
- Net income, on a non-GAAP basis, was $27.1 million for 2012 (49% of revenues) and $7.8 million for the fourth quarter (51% of revenues)
- Non-GAAP operating cash flow of $29.2 million for 2012 and $7.1 million for the fourth quarter
- Net cash at end of 2012 was $168.0 million
Fourth Quarter 2012 Results:
Total revenues in the fourth quarter of 2012 were $15.2 million, an increase of 7% compared to $14.3 million in the fourth quarter of 2011, and an increase of 64% compared to $9.3 million in the third quarter of 2012.
Net income, on a GAAPbasis, for the fourth quarter of 2012 was $4.8 million, or $0.17 per share (diluted), compared to net loss of $6.0 million, which included a one-time charge due to early repayment of $9.9 million to the Israeli Office of Chief Scientist (OCS), or $0.22 per share, in the fourth quarter of 2011, and net income of $0.1 million, or $0.00 per share (diluted), in the third quarter of 2012.
Net income, on a non-GAAP basis, for the fourth quarter of 2012 was $7.8 million, or $0.26 per share (diluted), compared to non-GAAP net income of $6.3 million, or $0.22 per share (diluted), in the fourth quarter of 2011, and non-GAAP net income of $3.1 million, or $0.10 per share (diluted), in the third quarter of 2012.
Full Year 2012 Results:
Total revenues for the year ended December 31, 2012 were $54.7 million, a year-over-year decrease of 14% compared to $63.5 million in 2011.
Net income on a GAAP basis for 2012 was $15.7 million, or $0.54 per share (diluted), compared to net income of $7.9 million, or $0.28 per share (diluted), in 2011.
Net income on a non-GAAP basis for 2012 was $27.1 million or $0.92 per share (diluted), compared with non-GAAP net income of $31.0 million, or $1.09 per share (diluted), in 2011.
Cash, cash equivalents, marketable securities and deposits as of December 31, 2012, totaled $168.0 million, compared to $160.1 million as of September 30, 2012 and compared to $126.8 million as of December 31, 2011. Cash generated from operations was $7.1 million for the fourth quarter and $29.2 million for the year, cash used in investing activities was $0.2 million for the fourth quarter and $1.5 million for the year, cash provided by financing activities (resulting from the exercise of options) was $1.0 million for the fourth quarter and $12.9 million for the year and an additional $0.6 million increase resulted from unrealized gains in marketable securities during 2012.
Eli Fruchter, CEO of EZchip, commented, "2012 was another transition year for EZchip. First, we completed the transition to Cisco becoming our largest customer, with all revenues being royalty-based, thereby increasing our gross margins to 84% and maintaining our outstanding 49% net margin in line with the net margin we achieved in 2010 and 2011. Second, we transitioned to NP-4, which surpassed the NP-3 run rate in its first full production year, and became our largest revenue generator. Finally, we laid the foundation for the NPS line of network processors for smart networks that will target both next-generation edge routers and data centers, and we believe could double our total available market.
"Of our five major NP-4 customers, two are in production and two entered production at the end of the third quarter and have placed initial production orders. The fifth customer, Huawei, is also expected to enter production in the first quarter; however, it has not yet placed any production orders and we believe Huawei may proceed to offer a lower-end in-house solution in parallel to the high-end NP-4 solution.
"Looking ahead, we believe that high-end NPUs, such as the NP-4, are required for high-end edge routers to be competitive. Therefore, based on the success of our customer products in the marketplace and the level of carriers' investment in Internet infrastructure, we believe NP-4 can significantly increase our revenues in the next few years. As for this year, we expect year-over-year growth in both Q1 and 2013, also when compared with 2011."
Conference Call
The Company will be hosting a conference call later today, February 13, 2013, 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 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. 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 Twelve Months Ended
________________________________________________________________
December September December December December
31, 30, 31, 31, 31,
2012 2012 2011 2012 2011
________ _________ _________ __________ _________
Revenues $ 15,207 $ 9,287 $ 14,269 $ 54,707 $ 63,457
Cost of
revenues 2,555 1,497 3,386 9,118 14,409
Amortization
of purchased
technology -- -- -- -- 597
Repayment of
OCS grants -- -- 9,938 -- 9,938
_________ _________ _________ _________ _________
Gross profit 12,652 7,790 945 45,589 38,513
Operating
expenses:
Research and
development,
net 5,180 5,182 4,352 19,736 16,695
Selling,
general and
administrative 3,220 3,047 3,097 12,634 12,059
_________ _________ _________ _________ _________
Total
operating 32,370 28,754
expenses 8,400 8,229 7,449
Operating 4,252 (439) (6,504) 13,219 9,759
income (loss)
Financial
income, net 587 566 551 2,432 1,713
_________ _________ _________ _________ _________
Income (loss)
before taxes 4,839 127 (5,953) 15,651 11,472
========= ========= ========= ========= =========
Taxes on
income -- -- -- -- (3,530)
Net income
(loss) $ 4,839 $ 127 $ (5,953) $ 15,651 $ 7,942
Net income
(loss) per
share:
Basic $ 0.17 $ 0.00 $ (0.22) $ 0.56 $ 0.30
Diluted $ 0.17 $ 0.00 $ (0.22) $ 0.54 $ 0.28
Weighted
average shares
used in per
share
calculation:
Basic 28,233,299 28,119,713 27,015,478 27,981,243 26,681,749
Diluted 28,869,499 28,748,784 27,015,478 28,842,408 28,001,428
__________ __________ __________ __________ __________
EZchip Semiconductor Ltd.
Reconciliation of GAAP to Non-GAAP Measures
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
________________________________________________________________
December September December December December
31, 30, 31, 31, 31,
2012 2012 2011 2012 2011
_________ _________ _________ _________ _________
GAAP gross
profit $ 12,652 $ 7,790 $ 945 $ 45,589 $ 38,513
Stock-based
compensation 74 73 73 298 359
Amortization
of purchased
technology -- -- -- -- 597
Repayment of
OCS grants* -- -- 9,938 -- 9,938
Non-GAAP gross
profit $ 12,726 $ 7,863 $ 10,956 $ 45,887 $ 49,407
_________ _________ _________ _________ _________
GAAP gross
profit as
percentage of
revenues 83.2% 83.9% 6.6% 83.3% 60.7%
Non-GAAP gross
profit as
percentage of
revenues 83.7% 84.7% 76.8% 83.9% 77.9%
_________ __________ _________ _________ _________
GAAP operating
expenses $ 8,400 $ 8,229 $ 7,449 $ 32,370 $ 28,754
Stock-based
compensation:
Research and
development (1,563) (1,557) (1,094) (6,026) (4,446)
Selling,
general and
administrative (1,265) (1,249) (1,051) (4,874) (3,801)
Amortization
of intangible
assets
Selling,
general and
administrative (51) (51) (95) (204) (380)
Non-GAAP
operating
expenses $ 5,521 $ 5,372 $ 5,209 $ 21,266 $ 20,127
_________ _________ _________ _________ _________
GAAP operating
income (loss) $ 4,252 $ (439) $ (6,504) $ 13,219 $ 9,759
Non-GAAP
operating
income $ 7,205 $ 2,491 $ 5,747 $ 24,621 $ 29,280
_________ _________ _________ _________ _________
GAAP net
income (loss) $ 4,839 $ 127 $ (5,953) $ 15,651 $ 7,942
Stock-based
compensation 2,902 2,879 2,218 11,198 8,606
Amortization
of purchased
intangible
assets 51 51 95 204 977
Repayment of
OCS grants* -- -- 9,938 -- 9,938
Taxes on
income** -- -- -- -- 3,530
_________ _________ _________ _________ _________
Non-GAAP net
income $ 7,792 $ 3,057 $ 6,298 $ 27,053 $ 30,993
_________ _________ _________ _________ _________
Non-GAAP net
income per
share -
Diluted $ 0.26 $ 0.10 $ 0.22 $ 0.92 $ 1.09
Non-GAAP
weighted
average shares
- Diluted*** 29,634,765 29,588,230 28,605,559 29,473,851 28,432,175
* 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.
Selected Condensed Consolidated Cash Flow Data on a Non-GAAP
Basis
(U.S. Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
_________________________________________________________
December September December December December
31, 30, 31, 31, 31,
2012 2012 2011 2012 2011
_________ _________ _________ _________ _________
Cash flows
from
operating
activities:
Net income
(loss) $ 4,839 $ 127 $ (5,953) $ 15,651 $ 7,942
Adjustments
to reconcile
net income
(loss) to net
cash provided
by operating
activities:
Repayment of
OCS grants* -- -- 9,938 -- 9,938
Depreciation
and
amortization 183 178 163 661 1,227
Decrease
(increase) in
trade and
other
receivables,
net (1,878) 2,991 1,113 1,870 (621)
Decrease
(increase) in
inventory 948 521 259 1,265 (1,266)
Decrease in
deferred tax
asset -- -- -- -- 3,513
Increase
(decrease) in
trade
payables and
other accrued
liabilities,
net 138 (585) 1,213 (1,400) (494)
Stock-based
compensation
2,902 2,879 2,218 11,198 8,606
Net cash
provided by
operating _________ _________ _________ _________ _________
activities 7,132 6,111 8,951 29,245 28,845
_________ _________ _________ _________ _________
Cash flows
from
investing
activities:
Purchase of
property and _________ _________ _________ _________ _________
equipment (239) (95) (97) (1,008) (411)
Purchase of _________ _________ _________ _________ _________
technology
-- -- (500) (500) (500)
Net cash used
in investing
activities (239) (95) (597) (1,508) (911)
Cash flows
from
financing
activities:
Proceeds from
exercise of
options
1,027 96 711 12,890 8,082
Net cash
provided by
financing _________ _________ _________ _________ _________
activities 1,027 96 711 12,890 8,082
_________ _________ _________ _________ _________
Repayment of
OCS grants* -- -- (9,938) -- (9,938)
Unrealized
gain (loss)
on marketable
securities,
net (33) 205 6 571 (618)
_________ _________ _________ __________ _________
Increase
(decrease) in
cash, cash
equivalents,
marketable
securities
and deposits
7,887 6,317 (867) 41,198 25,460
Cash, cash
equivalents,
marketable
securities
and deposits
at the
beginning of
the period 160,081 153,764 127,637 126,770 101,310
Cash, cash
equivalents,
marketable
securities
and deposits
at the end of
the period _________ _________ __________ _________ _________
$ 167,968 $ 160,081 $ 126,770 $ 167,968 $ 126,770
========= ========= ========== ========= =========
* 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 protected]
Tel: (US) +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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