EZchip Semiconductor Ltd.

Reconciliation of GAAP to Non-GAAP Measures

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

(Unaudited)

Three Months Ended

Twelve Months Ended

Dec. 31,

Sept. 30,

Dec. 31,

Dec. 31,

Dec. 31,

2014

2014

2013

2014

2013

GAAP gross profit

$       14,738

$       15,874

$       16,417

$       64,914

$       58,828

Stock-based compensation

206

75

73

431

292

Amortization of purchased intangible assets

2,143

--

--

2,143

--

Non-GAAP gross profit

$      17,087

$      15,949

$      16,490

$       67,488

$       59,120

GAAP gross profit as percentage of revenues

65.9%

82.5%

81.7%

77.3%

83.0%

Non-GAAP gross profit as percentage of revenues

76.4%

82.9%

82.1%

80.4%

83.4%

GAAP operating expenses

$       22,366

$       12,013

$       10,450

$       57,125

$       39,178

Stock-based compensation:

    Research and development

(4,311)

(2,360)

(2,045)

(11,359)

(7,963)

    Selling, general and administrative

(2,417)

(1,590)

(1,515)

(7,243)

(5,665)

Acquisition related costs

    Selling, general and administrative

(5,383)

(320)

--

(6,363)

--

Amortization of purchased intangible assets

    Selling, general and administrative

(58)

--

--

(58)

--

Non-GAAP operating expenses

$       10,197

$        7,743

$        6,890

$       32,102

$       25,550

GAAP operating income (loss)

$       (7,628)

$        3,861

$        5,967

$       7,789

$       19,650

Non-GAAP operating income

$         6,890

$       8,206

$        9,600

$       35,386

$       33,570

GAAP net income (loss)

$       (7,341)

$      4,199

$      6,513

$       9,158

$       21,698

Stock-based compensation

6,934

4,025

3,633

19,033

13,920

Acquisition related costs

5,383

320

--

6,363

--

Amortization of purchased intangible assets

2,201

--

--

2,201

--

Non-GAAP net income

$        7,177

$       8,544

$       10,146

$       36,755

$       35,618

Non-GAAP net income per share - Diluted

$          0.23

$          0.28

$          0.34

$           1.19

$           1.18

Non-GAAP weighted average shares - Diluted*

31,026,773

30,784,673

30,213,501

30,871,759

30,074,563

* 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.