EZCHIP SEMICONDUCTOR LTD YOKNEAM, Israel, Nov. 5, 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 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.
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.
Safe Harbor Statement
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 and the consummation of the merger with Mellanox Technologies, Ltd. 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 31, 2015 and its Current Reports on Form 6-K (including EZchip's Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015)). 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.
Important Additional Information
This communication is neither an offer to purchase nor a solicitation of an offer to sell securities. Shareholders are urged to read the Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015), together with the Merger Agreement and other exhibits thereto, in their entirety because they contain important information. The Proxy Statement, dated October 13, 2015 (including the Merger Agreement with Mellanox Technologies, Ltd. and the fairness opinion received by the EZchip Board), has been filed by EZchip with the SEC and mailed to shareholders. The Supplement to the Proxy Statement, dated October 26, 2015, has been filed by EZchip with the SEC and is being mailed to shareholders. Shareholders may also obtain a free copy of these statements and other documents filed by EZchip with the SEC at the website maintained by the SEC at www.sec.gov by directing such requests to:
MacKenzie Partners, Inc.
Toll-free: (800) 322-2885
Collect: (212) 929-5500
EZchip Semiconductor Ltd.
Condensed Consolidated Statements of Operations
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
Revenues $30,694 $28,265 $19,241 $85,864 $61,631
Cost of revenues 7,941 6,911 3,367 22,924 11,455
Repayment of OCS grants* -- -- -- 9,636 --
Gross profit 22,753 21,354 15,874 53,304 50,176
Operating expenses:
Research and development, net 11,478 10,458 7,953 33,619 22,449
Selling, general and administrative 6,373 5,964 4,060 18,408 12,310
----- ----- ----- ------ ------
Total operating expenses 17,851 16,422 12,013 52,027 34,759
Operating income 4,902 4,932 3,861 1,277 15,417
Financial income, net 363 487 338 1,141 1,082
--- --- --- ----- -----
Income before income taxes 5,265 5,419 4,199 2,418 16,499
Income taxes (31) -- -- (31) --
--- --- --- --- ---
Net income $5,234 $5,419 $4,199 $2,387 $16,499
====== ====== ====== ====== =======
Net income per share:
Basic $0.18 $0.18 $0.14 $0.08 $0.57
Diluted $0.17 $0.18 $0.14 $0.08 $0.56
Weighted average shares used in
per share calculation:
Basic 29,833,740 29,980,199 29,297,876 29,896,108 29,145,777
Diluted 30,133,445 30,095,969 29,657,471 30,253,706 29,620,204
EZchip Semiconductor Ltd.
Reconciliation of GAAP to Non-GAAP Measures
(U.S. Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
GAAP gross profit $22,753 $21,354 $15,874 $53,304 $50,176
Stock-based compensation 102 102 75 307 225
Amortization of purchased intangible
assets
233 233 -- 1,439 --
Repayment of OCS grants* -- -- -- 9,636 --
Non-GAAP gross profit $23,088 $21,689 $15,949 $64,686 $50,401
------- ------- ------- ------- -------
GAAP gross profit as percentage of revenues 74.1% 75.5% 82.5% 62.1% 81.4%
---- ---- ---- ---- ----
Non-GAAP gross profit as percentage of revenues
75.2% 76.7% 82.9% 75.3% 81.8%
---- ---- ---- ---- ----
GAAP operating expenses $17,851 $16,422 $12,013 $52,027 $34,759
Stock-based compensation:
Research and development (2,964) (2,996) (2,360) (8,894) (7,048)
Selling, general and administrative (1,670) (1,787) (1,590) (5,222) (4,826)
Acquisition related costs
Selling, general and administrative (899) -- (320) (899) (980)
Amortization of purchased intangible assets -Selling, general and
administrative
(347) (347) -- (1,041) --
---- ---- --- ------ ---
Non-GAAP operating expenses $11,971 $11,292 $7,743 $35,971 $21,905
------- ------- ------ ------- -------
GAAP operating income $4,902 $4,932 $3,861 $1,277 $15,417
Non-GAAP operating income $11,117 $10,397 $8,206 $28,715 $28,496
------- ------- ------ ------- -------
GAAP net income $5,234 $5,419 $4,199 $2,387 $16,499
Stock-based compensation 4,736 4,885 4,025 14,423 12,099
Acquisition related costs 899 -- 320 899 980
Amortization of purchased intangible assets
580 580 -- 2,480 --
Income taxes 31 -- -- 31 --
Repayment of OCS grants* -- -- -- 9,636 --
--- --- --- ----- ---
Non-GAAP net income $11,480 $10,884 $8,544 $29,856 $29,578
------- ------- ------ ------- -------
Non-GAAP net income per share - Diluted $0.36 $0.34 $0.28 $0.94 $0.96
Non-GAAP weighted average shares - Diluted**
31,616,888 31,811,176 30,784,673 31,657,220 30,678,851
* During February 2015 the Company 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, the Company eliminated all future royalty obligations related to its
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)
September 30, December 31,
2015 2014
---- ----
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable securities and
deposits $200,381 $185,757
Trade receivables, net 13,513 10,865
Other receivables 3,106 4,735
Inventories 5,941 6,459
Total current assets 222,941 207,816
NON CURRENT ASSETS:
Severance pay fund 7,346 7,091
Long term investment and others 1,013 348
Total non current assets 8,359 7,439
PROPERTY AND EQUIPMENT, NET 2,857 3,601
INTANGIBLE ASSETS, NET 16,142 17,312
GOODWILL 127,706 127,355
TOTAL ASSETS $378,005 $363,523
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $2,970 $2,664
Other payables and accrued expenses 13,752 13,726
------ ------
Total current liabilities 16,722 16,390
ACCRUED SEVERANCE PAY 8,155 7,815
SHAREHOLDERS' EQUITY:
Share capital 170 169
Additional paid-in capital 364,794 349,050
Treasury shares at cost (4,748) --
Accumulated other comprehensive loss (305) (731)
Accumulated deficit (6,783) (9,170)
Total shareholders' equity 353,128 339,318
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $378,005 $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 Nine Months Ended
------------------ -----------------
September 30, June 30, September 30, September 30, September 30,
2015 2015 2014 2015 2014
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income $5,234 $5,419 $4,199 $2,387 $16,499
Adjustments to reconcile net income to net
cash provided by operating activities:
Repayment of OCS grants* -- -- -- 9,636 --
Depreciation and amortization 1,364 1,372 175 4,519 509
Decrease (increase) in trade and other receivables, net
(1,900) 2,351 5,315 (654) 3,747
Decrease (increase) in inventory 1,279 (1,640) 1,645 518 1,640
Increase (decrease) in trade payables and other accrued liabilities, net
1,457 (2,024) (1,233) (596) (1,663)
Stock-based compensation 4,736 4,885 4,025 14,423 12,099
Net cash provided by operating activities 12,170 10,363 14,126 30,233 32,831
------ ------ ------ ------ ------
Cash flows from investing activities:
Purchase of property and equipment (282) (240) (318) (605) (538)
Purchase of technology (250) (250) -- (500) (2,415)
Long term investment and others (740) (351) (10,000) (1,091) (10,000)
Net cash used in investing activities (1,272) (841) (10,318) (2,196) (12,953)
------ ---- ------- ------ -------
Cash flows from financing activities:
Proceeds from exercise of options 646 359 498 1,322 902
Purchase of treasury shares -- (4,748) -- (4,748) --
Net cash provided by (used in) financing activities
646 (4,389) 498 (3,426) 902
--- ------ --- ------ ---
Repayment of OCS grants* -- -- -- (9,636) --
Cash adjustment of marketable securities, net** (143) (274) (85) (351) (205)
---- ---- --- ---- ----
Increase in cash, cash equivalents, marketable securities and deposits
11,401 4,859 4,221 14,624 20,575
Cash, cash equivalents, marketable securities and deposits at the beginning of the period
188,980 184,121 219,219 185,757 202,865
------- ------- ------- ------- -------
Cash, cash equivalents, marketable securities $223,440 $223,440
and deposits at the end of the period
$200,381 $188,980 $200,381
======== ======== ========
* During February 2015 the Company 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, the Company eliminated all future royalty obligations related to its
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 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
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SOURCE EZchip Semiconductor Ltd.
