EZchip Achieves Record Revenues of $10.7 Million in Third Quarter 2009

October 29, 2009 8:00 AM EDT

YOKNEAM, Israel--(BUSINESS WIRE)-- EZchip Semiconductor Ltd. (NASDAQ: EZCH), a provider of network processors, today announced its results for the third quarter ended September 30, 2009.

Third Quarter 2009 Summary:

    --  Third quarter revenues increased 18% year-over-year and 60%
        sequentially, reaching $10.7 million
    --  Gross margin for the quarter reached 67.5% on GAAP basis and 72.6% on
        non-GAAP basis
    --  Net income for the quarter of $1.8 million (17% of revenues) on GAAP
        basis
    --  Net income for the quarter of $3.9 million (36% of revenues) on non-GAAP
        basis
    --  Cash increased by $5.2 million during the quarter; Net cash position, as
        of end September 2009, totaled $60.6 million

Third Quarter 2009 Results:

Total revenues in the third quarter of 2009 were $10.7 million, an increase of 18% compared to $9.0 million in the third quarter of 2008, and an increase of 60% compared to $6.7 million in the second quarter of 2009.

Net income, on a GAAP basis, for the third quarter of 2009 was $1.8 million, or $0.07 per share (diluted), compared to net income of $0.8 million, or $0.03 per share (diluted), in the third quarter of 2008, and a net loss of $0.7 million, or $0.03 loss per share, in the second quarter of 2009.

Net income, on a non-GAAP basis, for the third quarter of 2009 was $3.9 million, or $0.15 per share (diluted), compared to non-GAAP net income of $2.4 million, or $0.09 per share (diluted), in the third quarter of 2008, and non-GAAP net income of $1.2 million, or $0.05 per share (diluted), in the second quarter of 2009.

Cash, cash equivalents and marketable securities as of September 30, 2009, totaled $60.6 million, compared to $55.4 million as of June 30, 2009. Cash generated from operations during the third quarter was $4.9 million, cash provided by financing activities was $0.2 million and an additional $0.1 million resulted from unrealized gains in marketable securities.

First Nine Months 2009 Results:

Total revenues for the nine months ended September 30, 2009 totaled $27.2 million, a year over year increase of 13% compared to $24.0 million for the nine months ended September 30, 2008. Net income on a GAAP basis for the nine months ended September 30, 2009 was $2.5 million or $0.09 per share (diluted), compared to a net loss of $5.6 million, or $0.25 loss per share for the nine months ended September 30, 2008. Net income on a non-GAAP basis for the nine months ended September 30, 2009 was $8.5 million or $0.33 per share (diluted), compared with non-GAAP net income of $4.2 million, or $0.16 per share (diluted), for the nine months ended September 30, 2008.

Eli Fruchter, CEO of EZchip commented, "This was a very strong third quarter for EZchip with record revenues, profits and cash generation. Revenues from our principal customer grew significantly this quarter and reached record levels. Revenues from our other leading CESR customer, which has the potential to become our largest customer over time, are not yet material. We are extremely pleased that we were able to achieve our growth this quarter even before this customer has started to ramp.

"We are also very pleased with the significant revenue growth resulting from our other networking customers. We expect this group of customers to become a significant growth driver as their NP-2 based products have reached volume production, their NP-3 based products are moving into production and they are now selecting the NPA and the NP-4 for their next generation products. These customers grow our presence in other Carrier Ethernet segments, beyond CESR, and we believe that we will benefit from the growth in these segments in the coming years, growth that will eventually lead to a more diversified customer base.

"This quarter we also made progress in the development of our next generation network processor, the NP-4, and remain on track for sampling before the end of 2009. Our NPA family of products, targeting the access market, is also progressing as planned. We are currently in advanced laboratory testing, and we expect to move into production in the first quarter of 2010.

"We believe we are on track for long term growth. We expect continued revenue growth in the fourth quarter, both sequentially and year over year, and, based on our initial indications, we expect to continue generating year over year revenue growth in 2010."

Conference Call

The Company will be hosting a conference call today, October 29, 2009, at 10:00am ET, 7:00am PT, 2:00pm UK time and 4:00pm Israel time. On the call, management will review and discuss the results, and will be available to answer investor questions.

To participate through live webcast, please access the corporate website, http://www.ezchip.com, at least 10 minutes before the conference call commences.

To participate through dial-in, please call one of the following teleconferencing numbers. Please begin placing your calls at least 15 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1 888 668 9141            UK Dial-in Number: 0 800 917 5108

International Dial-in Number (Israel): +972  Israel Dial-in Number: 03 918 0609
3 918 0609

For those unable to listen to the live call, a replay of the call 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 Semiconductor 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 SFAS 123R, amortization of intangible assets, in-process research and development charge and net loss/ (income) attributable to noncontrolling interest. 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 its customers with solutions that scale from 1-Gigabit to 100-Gigabits per second with a common architecture and software across all products. EZchip's network processors provide the flexibility and integration that enable triple-play data, voice and video services in systems that make up the new Carrier Ethernet networks. Flexibility and integration make EZchip's solutions ideal for building systems for a wide range of applications in telecom networks, enterprise backbones and data centers. 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 30, 2009 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.

-- FINANCIAL TABLES FOLLOW --

EZchip Semiconductor Ltd.

Condensed Consolidated Statements of Operations

(U.S. Dollars in thousands, except per share amounts)

(Unaudited)

                      Three Months Ended                  Nine Months Ended

                      Sept. 30,   June 30,    Sept. 30,   Sept. 30,   Sept. 30,

                      2009        2009        2008        2009        2008

Revenues              $ 10,651    $ 6,673     $ 9,023     $ 27,172    $ 23,981

Cost of revenues      2,970       1,860       2,958       7,636       8,934

Amortization of       496         497         496         1,489       1,586
purchased technology

Gross profit          7,185       4,316       5,569       18,047      13,461

Operating expenses:

Research and          3,361       3,237       3,216       9,882       9,515
development, net

In-process research
and development       --          --          --          --          5,125
charge

Selling, general and  2,150       2,028       1,973       6,316       5,500
administrative

Total operating       5,511       5,265       5,189       16,198      20,140
expenses

Operating income      1,674       (949)       380         1,849       (6,679)
(loss)

Financial income,     232         213         396         721         1,005
net

Income (loss) before
noncontrolling        1,906       (736)       776         2,570       (5,674)
interest

Less: Net (income)
loss attributable to  (85)        25          16          (51)        37
noncontrolling
interest

Net income (loss)     $ 1,821     $ (711)     $ 792       $ 2,519     $ (5,637)

Net income (loss)
per share:

Basic                 $ 0.08      $ (0.03)    $ 0.03      $ 0.11      $ (0.25)

Diluted               $ 0.07      $ (0.03)    $ 0.03      $ 0.09      $ (0.25)

Weighted average
shares used in per
share calculation:

Basic                 23,357,356  23,350,668  23,337,336  23,350,765  22,934,305

Diluted               23,363,095  23,350,668  23,400,877  23,364,395  22,934,305

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

                      Sept. 30,   June 30,    Sept. 30,   Sept. 30,   Sept. 30,

                      2009        2009        2008        2009        2008

GAAP gross profit     $ 7,185     $ 4,316     $ 5,569     $ 18,047    $ 13,461

Stock-based           51          51          32          144         84
compensation

Amortization of
purchased tangible &  496         522         612         1,539       2,161
intangible assets

Non-GAAP gross        $ 7,732     $ 4,889     $ 6,213     $ 19,730    $ 15,706
profit

GAAP gross profit as
percentage of         67.5%       64.7%       61.7%       66.4%       56.1%
revenues

Non-GAAP gross
profit as percentage  72.6%       73.3%       68.9%       72.6%       65.5%
of revenues

GAAP operating        $ 5,511     $ 5,265     $ 5,189     $ 16,198    $ 20,140
expenses

Stock-based
compensation:

Research and          (676)       (674)       (430)       (2,042)     (1,166)
development

Selling, general and  (543)       (525)       (431)       (1,551)     (964)
administrative

Amortization of
purchased intangible
assets:

In-process research
and development       --          --          --          --          (5,125)
charge

Selling, general and  (210)       (210)       (118)       (630)       (356)
administrative

Non-GAAP operating    $ 4,082     $ 3,856     $ 4,210     $ 11,975    $ 12,529
expense

GAAP operating        $ 1,674     $ (949)     $ 380       $ 1,849     $ (6,679)
income/(loss)

Non-GAAP operating    $ 3,650     $ 1,033     $ 2,003     $ 7,755     $ 3,177
income

GAAP net income/      $ 1,821     $ (711)     $ 792       $ 2,519     $ (5,637)
(loss)

Stock-based           1,270       1,250       893         3,737       2,214
compensation

Amortization of       706         732         730         2,169       2,517
purchased assets

In-process research
and development       --          --          --          --          5,125
charge

Net income (loss)
attributable to       85          (25)        (16)        51          (37)
noncontrolling
interest

Non-GAAP net income   $ 3,882     $ 1,246     $ 2,399     $ 8,476     $ 4,182

Non-GAAP net income   $ 0.15      $ 0.05      $ 0.09      $ 0.33      $ 0.16
per share - Diluted

Non-GAAP weighted
average shares -      23,467,558  23,477,245  23,547,840  23,452,991  23,022,404
Diluted*

* 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 SFAS 123R.

EZchip Semiconductor Ltd.

Condensed Consolidated Balance Sheet

(U.S. Dollars in thousands)

                                                   September 30,  December 31,

                                                   2009           2008

                                                   (Unaudited)    (Audited)

ASSETS

CURRENT ASSETS:

Cash, cash equivalents and marketable securities   $ 60,557       $ 48,115

Trade receivables, net                             5,252          5,040

Other receivables                                  1,130          623

Inventories                                        2,159          3,884

Total current assets                               69,098         57,662

LONG-TERM INVESTMENTS:

Prepaid development and production costs, net      --             50

Severance pay fund                                 3,944          3,148

Total long-term investments                        3,944          3,198

PROPERTY AND EQUIPMENT, NET                        214            273

Goodwill                                           96,276         96,276

Intangible assets, net                             4,575          6,694

TOTAL ASSETS                                       $ 174,107      $ 164,103

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Trade payables                                     $ 406          $ 888

Other payables and accrued expenses                6,125          4,220

Total current liabilities                          6,531          5,108

LONG TERM LIABILITIES:

Accrued severance pay                              4,624          4,081

EQUITY:

Share capital                                      134            134

Additional paid-in capital                         250,787        247,356

Accumulated other comprehensive income (loss)      746            (705)

Accumulated deficit                                (92,125)       (94,644)

Noncontrolling interest *                          3,410          2,773

Total equity                                       162,952        154,914

TOTAL LIABILITIES AND EQUITY                       $ 174,107      $ 164,103

* Due to initial application of SFAS 160 "Noncontrolling interests in
Consolidated Financial Statements, an amendment of ARB No. 51".

    Source: EZchip Semiconductor Ltd.

Related Categories

Press Releases

Stocks Mentioned

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?