EZchip Announces Third Quarter 2012 Results

YOKNEAM, Israel, November 8, 2012 — (PRNewswire) —

EZchip Semiconductor Ltd. (NASDAQ: EZCH), a leader in Ethernet network processors, today announced its results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights:

  • Third quarter revenues of $9.3 million
  • Gross margin reached 83.9% on a GAAP basis and 84.7% on a non-GAAP basis
  • Net income was $0.1 million on a GAAP basis
  • Net income was $3.1 million on a non-GAAP basis
  • Operating cash flow of $6.1 million
  • End of quarter net cash was $160.1 million

Third Quarter 2012 Results:

Total revenues in the third quarter of 2012 were $9.3 million, a decrease of 50% compared to $18.7 million in the third quarter of 2011, and a decrease of 41% compared to $15.8 million in the second quarter of 2012.

Net income, on a GAAPbasis, for the third quarter of 2012 was $0.1 million, or $0.00 per share (diluted), compared to net income of $7.7 million, or $0.27 per share (diluted), in the third quarter of 2011, and net income of $5.6 million, or $0.19 per share (diluted), in the second quarter of 2012.

Net income, on a non-GAAP basis, for the third quarter of 2012 was $3.1 million, or $0.10 per share (diluted), compared to non-GAAP net income of $9.9 million, or $0.35 per share (diluted), in the third quarter of 2011, and non-GAAP net income of $8.4 million, or $0.29 per share (diluted), in the second quarter of 2012.

Cash, cash equivalents, marketable securities and deposits as of September 30, 2012, totaled $160.1 million, compared to $153.8 million as of June 30, 2012. Cash generated from operations during the third quarter was $6.1 million, cash used in investing activities was $0.1 million, cash provided by financing activities (resulting from the exercise of options) was $0.1 million and an increase of $0.2 million resulted from unrealized gain on marketable securities.

First Nine Months 2012 Results

Total revenues for the nine months ended September 30, 2012 were $39.5 million, a year-over-year decrease of 20% compared to $49.2 million for the nine months ended September 30, 2011. Net income on a GAAP basis for the nine months ended September 30, 2012 was $10.8 million, or $0.38 per share (diluted), compared to net income of $13.9 million, or $0.50 per share (diluted), for the nine months ended September 30, 2011. Net income on a non-GAAP basis for the nine months ended September 30, 2012 was $19.3 million or $0.65 per share (diluted), compared to non-GAAP net income of $24.7 million, or $0.87 per share (diluted), for the nine months ended September 30, 2011.

Eli Fruchter, CEO of EZchip, commented, "We are pleased to report that two additional large customers entered production with their NP-4 based platforms at the end of the third quarter and we expect a third large customer to enter production before the end of the year, resulting in our five major CESR customers being in production with NP-4 before the end of the year.  We expect these customers to begin contributing to our revenues in the fourth quarter, and to contribute more significantly to our revenues in 2013. The actual revenue ramp from these new NP-4 platforms will depend on their success in the market and the CAPEX level of carriers."

"During the quarter we unveiled our upcoming product, the NPS - Network Processor for Smart networks - that we believe is a game changer. It integrates a 400 Gbps NPU, Traffic Manager, Deep Packet Inspection (DPI) and security functions, search engines, C programming and support for the Linux® operating system in one chip. The NPS will target the carrier, cloud and data center equipment markets and support Software Defined Networks (SDN), OpenFlow and virtualization. With NPS, we are targeting these markets with an extremely competitive product that merges functions provided by multiple devices today, at significantly higher speeds and significantly lower power consumption and cost.  This is in addition to targeting our traditional edge routing market in which we believe the NPS leapfrogs in-house and other merchant silicon solutions with its L2-7 capabilities for next generation line cards."

Conference Call

The Company will be hosting a conference call later today, November 8, 2012, 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 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.

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