EZCHIP SEMICONDUCTOR LTD YOKNEAM, Israel, May 13, 2015 /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 first quarter ended March 31, 2015 and is updating on the status of NPS adoption by its major customers.
First Quarter 2015 Highlights:
-- First quarter revenues of $26.9 million
-- Gross margin reached 74.0% on a non-GAAP basis
-- Gross margin reached 34.2% on a GAAP basis, including a one-time charge
due to early repayment of $9.6 million to the Israeli Office of Chief
Scientist (OCS)
-- Net income, on a non-GAAP basis, was $7.5 million
-- Net loss, on a GAAP basis, was $8.3 million (including a one-time charge
due to early repayment of $9.6 million to the OCS)
-- Operating cash flow of $7.7 million
-- Net cash at end of quarter was $184.1 million
First Quarter 2015 Results:
Total revenues in the first quarter of 2015 were $26.9 million, an increase of 33% compared to $20.3 million in the first quarter of 2014, and an increase of 20% compared to $22.4 million in the fourth quarter of 2014.
Net loss, on a GAAP basis, for the first quarter of 2015 was $8.3 million, which includes a one-time charge due to early repayment of $9.6 million to the Israeli Office of Chief Scientist (OCS), or $0.28 per share, compared to net income of $6.1 million, or $0.21 per share (diluted), in the first quarter of 2014, and net loss of $7.3 million (reduced by expenses of $10.5 million related to the Tilera acquisition), or $0.25 per share, in the fourth quarter of 2014.
Net income, on a non-GAAP basis, for the first quarter of 2015 was $7.5 million, or $0.24 per share (diluted), compared to non-GAAP net income of $10.0 million, or $0.33 per share (diluted), in the first quarter of 2014, and non-GAAP net income of $7.2 million, or $0.23 per share (diluted), in the fourth quarter of 2014.
Cash, cash equivalents, marketable securities and deposits as of March 31, 2015, totaled $184.1 million, compared to $185.8 million as of December 31, 2014. Cash generated from operations was $7.7 million, cash used in investing activities was $0.1 million, cash provided by financing activities was $0.3 million, resulting from the exercise of options, and an additional $9.6 million was used for the early repayment of OCS grants.
Early Repayment of OCS Grants
During February 2015 we made a one-time early payment of $9.6 million to the Israeli Office of Chief Scientist, representing the full balance of the contingent liability related to the NP-5 grants received. Upon making this payment, we have eliminated all future royalty obligations related to our anticipated NP-5 revenues and saved the associated future interest payments related to such obligations.
Status of NPS Adoption by Major Customers
With respect to EZchip's largest customer and that customer's plans for next generation line cards used in its routing platform, we are updating that EZchip's NPS-400 is currently not the plan of record for that customer's next generation line cards. This customer's routing platform has recently begun production shipments with EZchip's NP-5 network processor, and based upon our current information, we do not believe a next generation successor for the NP-5 is likely to ship for approximately three years.
We believe our customer's next generation line cards will require the NP-5 successor to provide higher throughput than the NPS-400 and that the customer is currently developing such a solution in-house. In parallel EZchip is also developing its successor to the NPS-400 with higher throughput that is expected to be available at the same time frame.
Based on our experience in prior NPU generations, each NPU generation serves a customer's platform for approximately three years before the next generation NPU arrives, and then over time, begins to take the leading position in customer shipments. Accordingly, if our largest customer does not change its current plan to use an in-house solution for the NP-5 successor, EZchip's revenues from sales to that customer are expected to start being affected only after this three year period elapses, which is the timeframe estimated to develop a new chip, bring it to production, and start gradual replacement of the NP-5. We believe the NP-5 will continue generating revenues at this customer for several more years beyond this three year period.
It should be noted that the NPS-400 is being considered for other substantial platforms at this same customer. Further, the NPS-400 is currently under consideration across a broad base of customers, including multiple Tier-1 customers, who are awaiting NPS samples during the second half of 2015 in order to become confirmed design wins for a variety of platforms and applications, in carrier networks, large data centers and networking appliances.
Eli Fruchter, CEO of EZchip, commented,
"The first quarter of 2015 was a record quarter for revenues for EZchip with yet another strong quarter ahead of us. We view this as a significant achievement considering the soft carrier spending environment", said Eli Fruchter, CEO of EZchip. "EZchip's revenues remain poised to see further growth in the coming years in light of the significant adoption of NP-5 by customers, including at our largest routing customer, combined with the higher ASP for NP-5, as well as the revenues from NPS expected to begin in 2016.
"As we estimate it may be three years before an NP-5 successor becomes available at our largest customer through internally developed silicon, there is ample time for EZchip to complete our development of the NPS-400 successor, the NPS-1000, a 1-Terabit throughput NPU (2.5x faster than the NPS?400). The NPS-1000 is currently under development, and we believe it may be possible to sample within our current largest customer's expected product development cycle and exceed the required throughput for its next generation line cards. NPS-1000 could then potentially lead to an opportunity to reengage our current largest customer regarding its choice to use internally developed silicon.
"As for the NPS-400, it is important to note that several Tier-1 service providers and data center operators, as well as Tier-1 networking vendors, have already selected the NPS-400 and at this time are waiting for the NPS-400 to sample in order to start their product designs, transitioning towards confirmed design wins. We hope to be able to report future design win traction shortly after the NPS-400 tapes out during the third quarter, with samples during the fourth quarter.
"In addition, our upcoming TILE-Mx multicore CPU furthers our push into new and expanding multicore opportunities. We believe that both the NPS-400 and the TILE-Mx favorably position EZchip to become a key processor supplier to address the new SDN/NFV market dynamics, selling not only to equipment vendors, but also directly to the large service providers and data center operators, and expanding our TAM six fold to an estimated $2.2B by 2017", added Mr. Fruchter.
Conference Call
The Company will be hosting a conference call later today, May 13, 2015, 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/?ezchip=527, 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, 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.
ABOUT EZCHIP
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.
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, the integration of Tilera's business 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, 2015 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.
-- tables to follow --
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,
2015 2014 2014
---- ---- ----
Revenues $26,905 $22,358 $20,288
Cost of revenues 8,072 7,620 3,788
Repayment of OCS grants * 9,636 -- --
Gross profit 9,197 14,738 16,500
Operating expenses:
Research and development, net 11,683 11,172 7,102
Selling, general and
administrative 6,071 11,194 3,772
----- ------ -----
Total operating expenses 17,754 22,366 10,874
Operating income (loss) (8,557) (7,628) 5,626
Financial income, net 291 287 460
--- --- ---
Net income (loss) $(8,266) $(7,341) $6,086
======= ======= ======
Net income (loss) per share:
Basic $(0.28) $(0.25) $0.21
Diluted $(0.28) $(0.25) $0.21
Weighted average shares used
in per share calculation:
Basic 29,823,727 29,537,166 28,978,411
Diluted 29,823,727 29,537,166 29,338,690
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,
2015 2014 2014
---- ---- ----
GAAP gross profit $9,197 $14,738 $16,500
Stock-based compensation 103 206 74
Amortization of purchased
intangible assets 973 2,143 --
Repayment of OCS grants* 9,636 -- --
Non-GAAP gross profit $19,909 $17,087 $16,574
------- ------- -------
GAAP gross profit as percentage
of revenues 34.2% 65.9% 81.3%
---- ---- ----
Non-GAAP gross profit as
percentage of revenues 74.0% 76.4% 81.7%
---- ---- ----
GAAP operating expenses $17,754 $22,366 $10,874
Stock-based compensation:
Research and development (2,934) (4,311) (2,267)
Selling, general and
administrative (1,765) (2,417) (1,584)
Acquisition related costs
Selling, general and
administrative -- (5,383) --
Amortization of purchased
intangible assets
Selling, general and
administrative (347) (58) --
---- --- ---
Non-GAAP operating expenses $12,708 $10,197 $7,023
------- ------- ------
GAAP operating income (loss) $(8,557) $(7,628) $5,626
Non-GAAP operating income $7,201 $6,890 $9,551
------ ------ ------
GAAP net income (loss) $(8,266) $(7,341) $6,086
Stock-based compensation 4,802 6,934 3,925
Acquisition related costs -- 5,383 --
Amortization of purchased
intangible assets 1,320 2,201 --
Repayment of OCS grants* 9,636 -- --
Non-GAAP net income $7,492 $7,177 $10,011
------ ------ -------
Non-GAAP net income per share -
Diluted $0.24 $0.23 $0.33
Non-GAAP weighted average shares
- Diluted**
31,601,170 31,026,773 30,507,804
* During February 2015 we have made a
one-time early payment of $9.6
million to the Israeli Office of
Chief Scientist, representing the
full balance of the contingent
liability related to the NP-5
grants received. Upon making this
payment, we have eliminated all
future royalty obligations related
to our anticipated NP-5 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.
** 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,
2015 2014
---- ----
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable securities and
deposits $184,121 $185,757
Trade receivables, net 11,909 10,865
Other receivables 4,765 4,735
Inventories 5,580 6,459
Total current assets 206,375 207,816
NON CURRENT ASSETS:
Severance pay fund 7,108 7,091
Long term investment and others 425 348
Total non current assets 7,533 7,439
PROPERTY AND EQUIPMENT, NET 3,228 3,601
INTANGIBLE ASSETS, NET 17,985 17,312
GOODWILL 127,355 127,355
TOTAL ASSETS $362,476 $363,523
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $4,432 $2,664
Other payables and accrued expenses 13,972 13,726
------ ------
Total current liabilities 18,404 16,390
ACCRUED SEVERANCE PAY 7,862 7,815
SHAREHOLDERS' EQUITY:
Share capital 170 169
Additional paid-in capital 354,168 349,050
Accumulated other comprehensive loss (692) (731)
Accumulated deficit (17,436) (9,170)
Total shareholders' equity 336,210 339,318
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $362,476 $363,523
======== ========
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,
2015 2014 2014
---- ---- ----
Cash flows from operating
activities:
Net income (loss) $(8,266) $(7,341) $6,086
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Repayment of OCS grants* 9,636 -- --
Depreciation and Amortization 1,783 2,752 168
Increase in trade and other
receivables, net (1,105) (5,321) (1,471)
Decrease (increase) in
inventory 879 (152) (102)
Decrease in trade payables and
other accrued liabilities,
net
(29) (992) (164)
Stock-based compensation 4,802 6,934 3,925
Net cash provided by (used in)
operating activities 7,700 (4,120) 8,442
----- ------ -----
Cash flows from investing
activities:
Purchase of property and
equipment (83) (160) (196)
Purchase of technology -- (2,641) (1,348)
Long term investment and
others -- (31,580) --
Net cash used in investing
activities (83) (34,381) (1,544)
--- ------- ------
Cash flows from financing
activities:
Proceeds from exercise of
options 317 1,117 216
Net cash provided by financing
activities 317 1,117 216
--- ----- ---
Repayment of OCS grants* (9,636) -- --
Cash adjustment of marketable
securities, net** 66 (299) (7)
--- ---- ---
Increase (decrease) in cash,
cash equivalents, marketable
securities and deposits
(1,636) (37,683) 7,107
Cash, cash equivalents,
marketable securities and
deposits at the beginning of
the period
185,757 223,440 202,865
------- ------- -------
Cash, cash equivalents,
marketable securities and
deposits at the end of the
period $184,121 $185,757 $209,972
======== ======== ========
* During February 2015 we have made
a one-time early payment of
$9.6 million to the Israeli
Office of Chief Scientist,
representing the full balance of
the contingent liability related
to the NP-5 grants received.
Upon making this payment, we
have eliminated all future
royalty obligations related to
our anticipated NP-5 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.
** Including unrealized gain (loss)
on marketable securities,
accumulated interest accretion
and amortization of discount and
premium on marketable
securities.
Contact:
Jeffrey A Schreiner
jschreiner@ezchip.com
Tel: (US) 1 408 520 3676
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/ezchip-announces-first-quarter-2015-results-provides-update-on-status-of-nps-adoption-300082533.html
SOURCE EZchip Semiconductor Ltd.
