EZchip Announces Third Quarter 2014 Results

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 consummation of the Tilera acquisition 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 27, 2014 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.

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,
	2014	2014	2013	2014	2013

Revenues	$ 19,241	$ 22,102	$ 18,804	$ 61,631	$ 50,753
Cost of revenues	3,367	4,300	2,926	11,455	8,342
Gross profit	15,874	17,802	15,878	50,176	42,411

Operating expenses:
Research and development, net	7,953	7,394	6,527	22,449	18,892
Selling, general and administrative	4,060	4,478	3,310	12,310	9,836
Total operating expenses	12,013	11,872	9,837	34,759	28,728

Operating income	3,861	5,930	6,041	15,417	13,683
Financial income, net	338	284	487	1,082	1,502
Net income	$ 4,199	$ 6,214	$ 6,528	$ 16,499	$ 15,185

Net income per share:
Basic	$ 0.14	$ 0.21	$ 0.23	$ 0.57	$ 0.53
Diluted	$ 0.14	$ 0.21	$ 0.22	$ 0.56	$ 0.52
Weighted average shares used in per share calculation:
Basic	29,297,876	29,157,533	28,717,575	29,145,777	28,562,581
Diluted	29,657,471	29,473,870	29,151,003	29,620,204	29,092,293

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,
	2014	2014	2013	2014	2013

GAAP gross profit	$ 15,874	$ 17,802	$ 15,878	$ 50,176	$ 42,411
Stock-based compensation	75	76	73	225	219
Non-GAAP gross profit	$ 15,949	$ 17,878	$ 15,951	$ 50,401	$ 42,630

GAAP gross profit as percentage of revenues	82.5%	80.5%	84.4%	81.4%	83.6%
Non-GAAP gross profit as percentage of revenues	82.9%	80.9%	84.8%	81.8%	84.0%


GAAP operating expenses	$ 12,013	$ 11,872	$ 9,837	$ 34,759	$ 28,728
Stock-based compensation:
Research and development	(2,360)	(2,421)	(2,044)	(7,048)	(5,918)
Selling, general and administrative	(1,590)	(1,652)	(1,425)	(4,826)	(4,150)
Acquisition related costs
Selling, general and administrative	(320)	(660)	--	(980)	--

Non-GAAP operating expenses	$ 7,743	$ 7,139	$ 6,368	$ 21,905	$ 18,660


GAAP operating income	$ 3,861	$ 5,930	$ 6,041	$ 15,417	$ 13,683

Non-GAAP operating income	$ 8,206	$ 10,739	$ 9,583	$ 28,496	$ 23,970

GAAP net income	$ 4,199	$ 6,214	$ 6,528	$ 16,499	$ 15,185
Stock-based compensation	4,025	4,149	3,542	12,099	10,287
Acquisition related costs	320	660	--	980	--

Non-GAAP net income	$ 8,544	$ 11,023	$ 10,070	$ 29,578	$ 25,472

Non-GAAP net income per share - Diluted	$ 0.28	$ 0.36	$ 0.33	$ 0.96	$ 0.85
Non-GAAP weighted average shares - Diluted*	30,784,673	30,774,136	30,164,874	30,678,851	30,032,150

* 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,
	2014	2013
	(Unaudited)	(Audited)
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, marketable securities and deposits	$ 223,440	$ 202,865
Trade receivables, net	6,093	7,416
Other receivables	706	3,153
Inventories	4,329	5,969
Total current assets	234,568	219,403

NON CURRENT ASSETS:
Severance pay fund	7,257	7,416
Long term investment and others	10,302	364
Total non current assets	17,559	7,780

PROPERTY AND EQUIPMENT, NET	2,106	2,114

INTANGIBLE ASSETS, NET	5,242	4,127

GOODWILL	96,276	96,276

TOTAL ASSETS	$ 355,751	$ 329,700

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	$ 792	$ 3,951
Other payables and accrued expenses	7,708	7,309
Total current liabilities	8,500	11,260

ACCRUED SEVERANCE PAY	8,059	8,164

SHAREHOLDERS' EQUITY:
Share capital	167	164
Additional paid-in capital	341,001	328,003
Accumulated other comprehensive income (loss)	(147)	437
Accumulated deficit	(1,829)	(18,328)
Total shareholders' equity	339,192	310,276

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 355,751	$ 329,700

	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
		Sept. 30,	June 30,	Sept. 30,	Sept. 30,	Sept. 30,
		2014	2014	2013	2014	2013
Cash flows from operating activities:
Net income		$ 4,199	$ 6,214	$ 6,528	$ 16,499	$ 15,185
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		175	166	158	509	442
Decrease (increase) in trade and other receivables, net		5,315	(97)	(2,083)	3,747	(2,224)
Decrease (increase) in inventory		1,645	97	584	1,640	(768)
Increase (decrease) in trade payables and other accrued liabilities, net		(1,233)	(266)	1,605	(1,663)	1,791
Stock-based compensation		4,025	4,149	3,542	12,099	10,287
Net cash provided by operating activities		14,126	10,263	10,334	32,831	24,713

Cash flows from investing activities:
Purchase of property and equipment		(318)	(24)	(846)	(538)	(1,446)
Purchase of technology		--	(1,067)	(1,163)	(2,415)	(1,294)
Long term Investment and others		(10,000)	--	--	(10,000)	--
Net cash used in investing activities		(10,318)	(1,091)	(2,009)	(12,953)	(2,740)

Cash flows from financing activities:
Proceeds from exercise of options		498	188	450	902	1,284
Net cash provided by financing activities		498	188	450	902	1,284

Cash adjustment of marketable securities, net*		(85)	(113)	(20)	(205)	(595)

Increase in cash, cash equivalents, marketable securities and deposits		4,221	9,247	8,755	20,575	22,662
Cash, cash equivalents, marketable securities and deposits at the beginning of the period		219,219	209,972	181,875	202,865	167,968
Cash, cash equivalents, marketable securities and deposits at the end of the period		$ 223,440	$ 219,219	$ 190,630	$ 223,440	$ 190,630

* Including unrealized gain (loss) on marketable securities, accumulated interest accretion and amortization of discount and premium on marketable securities.

Contact:
Ehud Helft / Kenny Green
GK Investor & Public Relations
Email Contact
Tel: (US) 1 646 201 9246

SOURCE EZchip Semiconductor Ltd.

Contact:

EZchip Semiconductor Ltd.
Web: http://www.ezchip.com

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