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First Quarter 2009 Highlights:
- First quarter revenues increased 42% year-over-year and 3%
sequentially, reaching $9.8 million
- Gross margin for the quarter reached 66.5% on GAAP basis and 72.2% on
non-GAAP basis
- Net income for the quarter of $1.4 million on GAAP basis and $3.3
million on non-GAAP basis
- Operating cash flow for the quarter was $2.3M reaching a cash position
of $50.4 million at the end of March 2009
Second Quarter 2009 Outlook:
EZchip's principal customer, which accounts for more than half of EZchip's total revenues, has notified EZchip of intention to consume existing inventory in the second quarter of 2009 thereby substantially reducing its purchases of processors from EZchip. This is expected to have a material adverse effect on EZchip's revenue level in the second quarter, resulting in a substantial year-over-year quarterly decline. EZchip believes that sales by this customer of products incorporating EZchip's processors will continue to grow. This customer is expected to resume its purchases of processors scheduled for delivery in June 2009, and is forecasting that in the third quarter of 2009, purchases of processors will return to previously seen levels.
First Quarter 2009 Results:
Total revenues in the first quarter of 2009 were $9.8 million, an increase of 42% compared to $7.0 million in the first quarter of 2008, and an increase of 3% compared to $9.6 million in the fourth quarter of 2008.
Net income on a GAAP basis for the first quarter of 2009 was $1.4 million, or $0.05 per share (diluted), compared to a net loss of $6.3 million, or $0.28 per share, in the first quarter of 2008, and net income of $1.0 million, or $0.04 per share (diluted), in the fourth quarter of 2008.
Net income on a non-GAAP basis for the first quarter of 2009 was $3.3 million, or $0.13 per share (diluted), compared with non-GAAP net income of $0.5 million, or $0.02 per share (diluted), in the first quarter of 2008, and non-GAAP net income of $2.6 million, or $0.10 per share (diluted), in the fourth quarter of 2008.
Cash, cash equivalents and marketable securities as of March 31, 2009, totaled $50.4 million compared to $48.1 million as of December 31, 2008.
Eli Fruchter, CEO of EZchip Semiconductor commented, "In the first quarter of 2009 we increased revenues and attained strong growth in all financial parameters, reaching operating income margins of 31% and net income margins of 34% (non-GAAP). During the first quarter our customers for both versions of our NP-3 processor started to ship in production quantities and we expect volumes to ramp up in the coming quarters. During the first quarter we also signed an agreement appointing Marvell as the sole ASIC vendor for our NP-4 processors. As for customer wins, we have continued our design win momentum, signing up more customers for the NP-4 and won several tier-1 Passive Optical Network (PON) players that intend to use our NPA processors for their next generation PON products."
"Looking ahead, the use of video on the net continues to grow which will drive the growth in the CESR market. We therefore believe that the revenue decline that we expect for Q2 is a singular event and should not affect our long term growth and prospects." concluded Mr. Fruchter
Conference Call
The Company will be hosting a conference call today, May 7, 2009, at 10:00am ET, 07:00am PT, 03:00pm UK time and 05:00pm 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: 1-888-723-3163
UK Dial-in Number: 0-800-917-4613
International Dial-in Number (Israel): +972-3-918-0650
Israel Dial-in Number: 03-918-0650
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 minority interest in loss of EZchip Technologies. 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
March 31, December 31, March 31,
2009 2008 2008
Revenues $ 9,848 $ 9,585 $ 6,950
Cost of revenues 2,806 3,049 3,141
Amortization of purchased
technology 496 497 611
Gross profit 6,546 6,039 3,198
Operating expenses:
Research and development, net 3,284 3,438 2,958
In-process research and development
charge -- -- 5,125
Selling, general and administrative 2,138 1,967 1,715
Total operating expenses 5,422 5,405 9,798
Operating income (loss) 1,124 634 (6,600)
Financial income, net 276 403 291
Income (loss) before minority
interest 1,400 1,037 (6,309)
Minority interest in loss of EZchip
Technologies 9 -- 13
Net income (loss) $ 1,409 $ 1,037 $ (6,296)
Net income (loss) per share:
Basic $ 0.06 $ 0.04 $ (0.28)
Diluted $ 0.05 $ 0.04 $ (0.28)
Weighted average shares used in per
share calculation:
Basic 23,344,126 23,338,713 22,112,432
Diluted 23,358,681 23,342,501 22,112,432
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,
2009 2008 2008
GAAP gross profit $ 6,546 $ 6,039 $ 3,198
Stock-based compensation 42 32 20
Amortization of purchased
intangible assets 521 562 963
Non-GAAP gross profit $ 7,109 $ 6,633 $ 4,181
GAAP gross profit as
percentage of revenues 66.5% 63.0% 46.0%
Non-GAAP gross profit as
percentage of revenues 72.2% 69.2% 60.2%
GAAP operating expenses $ 5,422 $ 5,405 $ 9,798
Stock-based compensation:
Research and development (692) (434) (306)
Selling, general and
administrative (483) (454) (234)
Amortization of
purchased intangible
assets:
In-process research and
development charge -- -- (5,125)
Selling, general and
administrative (210) (119) (118)
Non-GAAP operating expense $ 4,037 $ 4,398 $ 4,015
GAAP operating income/(loss) $ 1,124 $ 634 $ (6,600)
Non-GAAP operating income $ 3,072 $ 2,235 $ 166
GAAP net income/(loss) $ 1,409 $ 1,037 $ (6,296)
Stock-based compensation 1,217 920 560
Amortization of purchased
intangible assets 731 681 1,081
In-process research and
development charge -- -- 5,125
Minority interest in loss of
EZchip Technologies (9) -- (13)
Non-GAAP net income $ 3,348 $ 2,638 $ 457
Non-GAAP net income per
share - Diluted $ 0.13 $ 0.10 $ 0.02
Non-GAAP weighted
average shares - Diluted* 23,465,246 23,358,251 22,169,404
* 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)
March 31, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and marketable
securities $ 50,377 $ 48,115
Trade receivables, net 5,889 5,040
Other receivables 1,405 623
Inventories 3,976 3,884
Total current assets 61,647 57,662
LONG-TERM INVESTMENTS:
Prepaid development and production
costs, net 25 50
Severance pay fund 3,007 3,148
Total long-term investments 3,032 3,198
PROPERTY AND EQUIPMENT, NET 284 273
Goodwill 96,276 96,276
Intangible assets, net 5,988 6,694
TOTAL ASSETS $ 167,227 $ 164,103
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables $ 1,428 $ 888
Other payables and accrued expenses 4,830 4,220
Total current liabilities 6,258 5,108
LONG TERM LIABILITIES:
Accrued severance pay 3,826 4,081
EQUITY:
Share capital 134 134
Additional paid-in capital 248,412 247,356
Accumulated other comprehensive loss (1,105) (705)
Accumulated deficit (93,235) (94,644)
Noncontrolling interest * 2,937 2,773
Total equity 157,143 154,914
TOTAL LIABILITIES AND EQUITY $ 167,227 $ 164,103
* On January 1, 2009 the Company adopted FAS 160 "Noncontrolling
interests in Consolidated Financial Statements, an amendment of ARB No.
51". Accordingly, the line item "Employee stock options in EZchip
Technologies" which was classified in prior periods as a mezzanine
account was reclassified to equity.
Contact:
Ehud Helft / Fiona Darmon
CCGK Investor Relations
info@gkir.com
Tel: (US) +1-646-797-2868 / +1-646-201-9246
SOURCE EZchip Semiconductor Ltd
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