Achieving $305.2 million, up 22%
year-over-year
GAAP operating margin 14.6%; Non-GAAP operating
margin 28.3%
Mellanox® Technologies, Ltd. (NASDAQ: MLNX), a leading supplier
of high-performance, end-to-end interconnect solutions for data
center servers and storage systems, today announced preliminary
financial results for its first quarter ended March 31,
2019.
“Mellanox delivered record revenue in Q1, achieving 5 percent
sequential growth and 22 percent year-over-year growth. All of our
product lines grew sequentially, showing the benefits of our
diversified data center strategy,” said Eyal Waldman, president and
CEO of Mellanox Technologies. “Our R&D execution has resulted
in differentiated products, while at the same time we have
generated operating margin of 14.6% on a GAAP basis and 28.3% on a
non-GAAP basis. Additionally, we increased cash and short-term
investments by $114 million during the quarter.”
“Across InfiniBand and Ethernet product lines, our innovations
are driving continued market leadership. Our 200 gigabit HDR
InfiniBand solutions are enabling the world’s fastest
supercomputers and driving our overall InfiniBand growth. During
Q1, HDR InfiniBand connected tens-of-thousands of compute and
storage end-points across supercomputing, hyperscale, and cloud
data centers around the globe to achieve breakthrough performance.
Our Ethernet solutions continue to penetrate the market for both
adapters and switches. Our market leadership in 25 gigabit per
second Ethernet solutions is well established, and our 100 gigabit
per second solutions are the fastest growing portion of our
Ethernet adapter product line. We are also encouraged by the
adoption of our BlueField System-on-a-Chip and SmartNIC technology.
With further innovations to come, Mellanox is well-positioned to
continue its growth trajectory,” Mr. Waldman concluded.
First Quarter 2019 - Highlights
- Revenue of $305.2 million in the first
quarter, an increase of 21.6 percent, compared to $251.0 million in
the first quarter of 2018.
- GAAP gross margins of 64.6 percent in
the first quarter, compared to 64.5 percent in the first quarter of
2018.
- Non-GAAP gross margins of 68.0 percent
in the first quarter, compared to 69.0 percent in the first quarter
of 2018.
- GAAP operating income of $44.7 million
in the first quarter, compared to $12.0 million in the first
quarter of 2018.
- Non-GAAP operating income of $86.3
million in the first quarter, or 28.3 percent of revenue, compared
to $52.1 million, or 20.8 percent of revenue in the first quarter
of 2018.
- GAAP net income of $48.6 million in the
first quarter, compared to $37.8 million in the first quarter of
2018.
- Non-GAAP net income of $86.5 million in
the first quarter, compared to $51.4 million in the first quarter
of 2018.
- GAAP net income per diluted share of
$0.87 in the first quarter, compared to $0.71 in the first quarter
of 2018.
- Non-GAAP net income per diluted share
of $1.59 in the first quarter, compared to $0.98 in the first
quarter of 2018.
- $88.4 million in cash provided by
operating activities in the first quarter, compared to $55.4
million in the first quarter of 2018.
- Cash and investments totaled $552.6
million at March 31, 2019, compared to $438.5 million at
December 31, 2018.
Commentary regarding Mellanox Acquisition by NVIDIA
As announced on March 11, 2019, NVIDIA Corporation intends to
acquire all the issued and outstanding common shares of Mellanox
for $125 per share in cash. The acquisition will unite
NVIDIA’s strength in accelerated computing with Mellanox’s
expertise in high-performance interconnect technology to address
the data center market, better serve our customers, and accelerate
innovation. Due to the pending acquisition, Mellanox will not hold
an earnings conference call and has suspended the practice of
providing forward-looking guidance.
Recent Mellanox Press Release Highlights
• March 18, 2019
Mellanox HDR 200G InfiniBand Deep Learning
Acceleration Engines Demonstrates Two Times Higher Performance for
Artificial Intelligence (AI) Platforms with NVIDIA
• March 12, 2019 Mellanox Introduces Breakthrough NVMe SNAP™
Technology to Simplify Composable Storage • March 11, 2019
Mellanox and NVIDIA Corporation jointly
announce entry into a definitive agreement and plan of merger
• March 5, 2019 Mellanox Showcases Live System Demonstrations of
LinkX™ 200G & 400G Cables & Transceivers at OFC 2019 •
March 4, 2019 Mellanox Propels JD Cloud to New Levels of
Performance and Efficiency • February 25, 2019 HDR 200G InfiniBand
Sets New Performance Records, Accelerating Multiple
High-Performance Computing and Artificial Intelligence Platforms
Around the World • January 30, 2019 Mellanox Delivers Record Fourth
Quarter and Annual 2018 Results, Exceeded $1 Billion in Annual
Revenue in 2018 • January 22, 2019 CSC, the Finnish IT Center for
Science, and the Finnish Meteorological Institute Select 200
Gigabit HDR InfiniBand to Accelerate Multi-Phase Supercomputer
Program • January 7, 2019 Mellanox 200 Gigabit HDR InfiniBand to
Accelerate a World-Leading Supercomputer at the High-Performance
Computing Center of the University of Stuttgart (HLRS) • January 3,
2019 Mellanox to Report Fourth Quarter 2018 Financial Results on
January 30, 2019
About Mellanox
Mellanox Technologies (NASDAQ: MLNX) is a leading supplier of
end-to-end Ethernet and InfiniBand intelligent interconnect
solutions and services for servers, storage, and hyper-converged
infrastructure. Mellanox’s intelligent interconnect solutions
increase data center efficiency by providing the highest throughput
and lowest latency, delivering data faster to applications,
unlocking system performance and improving security. Mellanox
offers a choice of high-performance solutions: network and
multicore processors, network adapters, switches, cables, software
and silicon, that accelerate application runtime and maximize
business results for a wide range of markets including high
performance computing, enterprise data centers, cloud, storage,
cyber security, telecom and financial services. More information is
available at: www.mellanox.com.
Mellanox has achieved and maintained the highest ISS Quality
Score possible beginning in May of 2017 and through the date of
this release, April 16, 2019.
GAAP to Non-GAAP Reconciliation
To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP),
Mellanox uses non-GAAP measures of net income which are
adjusted from results based on GAAP to exclude share-based
compensation expense, amortization expense of acquired intangible
assets, acquisition and other charges, restructuring and impairment
charges, gain on sale of investment in a private company,
non-operating foreign exchange gains and losses, and income tax
effects and adjustments. Acquisition and other charges include
expenses related to acquisitions of other companies, expenses
related to the proxy contest, and expenses related to the pending
acquisition of Mellanox by NVIDIA. Restructuring and impairment
charges include impairment charges related to our investment in
privately-held companies, as well as costs that are the result of
restructuring, consisting of employee termination and severance
costs, facilities related costs, contract cancellation charges, and
impairment of long-lived assets. Gain on sale of investment in a
private company represents the realized gain recognized when one of
our private company investees was acquired. Non-operating foreign
exchange gains and losses include the gains and losses as a result
of remeasuring our balance sheet items denominated in foreign
currencies and the gains and losses associated with the related
hedging instruments. The purpose of income tax effects and
adjustments is to exclude tax consequences associated with the
above excluded expense items, the non-cash impact on the tax
provision pertaining to changes in deferred tax assets associated
with carryforward losses, and reversals of valuation allowances.
The company believes the non-GAAP results provide useful
information to both management and investors, as these non-GAAP
results exclude expenses that are not indicative of our core
operating results. Management believes it is useful to exclude
share-based compensation expense, amortization expense of acquired
intangible assets, acquisition and other charges, restructuring and
impairment charges, gain on sale of investment in a private
company, non-operating foreign exchange gains and losses, and
income tax effects and adjustments because it enhances investors'
ability to understand our business from the same perspective as
management, which believes that such items are not directly
attributable to nor reflect the underlying performance of the
company's business operations. Further, management believes certain
non-cash charges such as share-based compensation, amortization of
acquired intangible assets, impairment charges, changes related to
the utilization of deferred taxes and the net impact on the
company's tax provision for non-GAAP adjustments do not reflect the
cash operating results of the business. These measures should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for or superior to GAAP
results. These non-GAAP measures may be different than the non-GAAP
measures used by other companies. A reconciliation of GAAP to
non-GAAP condensed consolidated statements of operations is also
presented in the financial statements portion of this release and
is posted under the "Investor Relations" section on our
website.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
All statements included or incorporated by reference in this
release, other than statements or characterizations of historical
fact, are forward-looking statements, statements related to trends
in the market for our solutions and services, opportunities for our
company in 2019 and beyond, future product capabilities and the
acquisition of Mellanox by NVIDIA. These forward-looking statements
are based on our current expectations, estimates and projections
about our industry and business, management's beliefs and certain
assumptions made by us, all of which are subject to change.
Forward-looking statements can often be identified by words such
as "projects," "anticipates," "expects," "intends," "plans,"
"predicts," "believes," "seeks," "estimates," "may," "will,"
"should," "would," "could," "potential," "continue," "ongoing,"
similar expressions and variations or negatives of these words.
These forward-looking statements are not guarantees of future
results and are subject to risks, uncertainties and assumptions
that could cause our actual results to differ materially and
adversely from those expressed in any forward-looking statement.
The risks and uncertainties that could cause our results to differ
materially from those expressed or implied by such forward-looking
statements include the continued expansion of our product line,
customer base and the total available market of our products, the
continued growth in demand for our products, the continued,
increased demand for industry standards-based technology, our
ability to react to trends and challenges in our business and the
markets in which we operate, our ability to anticipate market needs
or develop new or enhanced products to meet those needs, the
adoption rate of our products, our ability to establish and
maintain successful relationships with our OEM partners, our
ability to effectively compete in our industry, fluctuations in
demand, sales cycles and prices for our products and services, our
success converting design wins to revenue-generating product
shipments, the continued launch and volume ramp of large customer
sales opportunities, our ability to protect our intellectual
property rights, our ability to successfully acquire businesses and
technologies and to successfully integrate and operate these
acquired businesses, our success in realizing the anticipated
benefits of mergers and acquisitions, and our ability to obtain
debt at competitive rates or in sufficient amounts in order to fund
our contractual commitments. Furthermore, the majority of our
quarterly revenue are derived from customer orders received and
fulfilled in the same quarterly period. We have limited visibility
into actual end-user demand as such demand impacts us and our OEM
customer inventory balances in any given quarter. Consequently,
this introduces risk and uncertainty into our revenue and
production forecasts and business planning and could negatively
impact our financial results. In addition, current uncertainty in
the global economic environment poses a risk to the overall economy
as businesses may defer purchases in response to tighter credit
conditions, changing overall demand for our products, and negative
financial news. Consequently, our results could differ materially
from our prior results due to these general economic and market
conditions, political events and other risks and uncertainties
described more fully in our documents filed with or furnished to
the Securities and Exchange Commission. Additionally, there
are risks, uncertainties and assumptions in connection with the
proposed transaction with NVIDIA including, (i) the risk that
the proposed transaction may not be completed in a timely manner or
at all, which may adversely affect Mellanox’s business and the
price of the ordinary shares of Mellanox, (ii) the failure to
satisfy any of the conditions to the consummation of the proposed
transaction, including the approval of the merger agreement by the
shareholders of Mellanox and the receipt of certain governmental
and regulatory approvals, (iii) the occurrence of any event,
change or other circumstance that could give rise to the
termination of the merger agreement, (iv) the effect of the
announcement or pendency of the proposed transaction on Mellanox’s
business relationships, operating results and business generally,
(v) risks that the proposed transaction disrupts current plans
and operations and the potential difficulties in employee retention
as a result of the proposed transaction, (vi) risks related to
diverting management’s attention from Mellanox’s ongoing business
operations (vii) the outcome of any legal proceedings that may
be instituted against us related to the merger agreement or the
proposed transaction; and (viii) unexpected costs, charges or
expenses resulting from the proposed transaction.
More information about the risks, uncertainties and assumptions
that may impact our business is set forth in our annual report on
Form 10-K filed with the SEC on February 22,
2019. All forward-looking statements in this press release, are
based on information available to us as of the date hereof, and we
assume no obligation to update these forward-looking statements.
Amounts reported in this release are preliminary and subject to
finalization prior to the filing of our next Quarterly Report on
Form 10-Q.
Mellanox is a registered trademark of Mellanox
Technologies, Ltd. All other trademarks are property of their
respective owners.
Mellanox Technologies, Ltd. Condensed Consolidated
Statements of Operations (in thousands, except per share
data, unaudited) Three Months Ended March
31, 2019 2018 Total revenues $ 305,217 $
251,000 Cost of revenues 108,086 88,998 Gross profit
197,131 162,002 Operating expenses: Research and
development 92,205 86,426 Sales and marketing 40,097 39,494 General
and administrative 19,271 16,516 Restructuring and impairment
charges 903 7,587 Total operating expenses 152,476
150,023 Income from operations 44,655 11,979 Interest
expense (14 ) (1,171 ) Other income, net 8,245 638
Interest and other, net 8,231 (533 ) Income before taxes on
income 52,886 11,446 Provision for (benefit from) taxes on income
4,266 (26,397 ) Net income $ 48,620 $ 37,843
Net income per share — basic $ 0.90 $ 0.73 Net income
per share — diluted $ 0.87 $ 0.71 Shares used in
computing net income per share: Basic 54,227 51,819 Diluted 55,794
53,646
Mellanox Technologies, Ltd. Reconciliation
of Non-GAAP Adjustments (in thousands, except percentages,
unaudited) Three Months Ended March 31,
2019 2018
Reconciliation of
GAAP net income to non-GAAP:
GAAP net income $ 48,620 $ 37,843 Adjustments: Share-based
compensation expense: Cost of revenues 684 411 Research and
development 13,241 8,174 Sales and marketing 5,652 3,599 General
and administrative 4,665 2,790 Total share-based
compensation expense 24,242 14,974 Amortization of acquired
intangibles: Cost of revenues 9,708 10,883 Research and development
192 192 Sales and marketing 1,844 2,230 Total
amortization of acquired intangibles 11,744 13,305 Acquisition and
other charges: Research and development 90 287 Sales and marketing
30 160 General and administrative 4,654 3,831 Total
acquisition and other charges 4,774 4,278 Restructuring and
impairment charges: Operating expense 903 7,587 Other income, net
1,755 — Total restructuring and impairment charges
2,658 7,587 Gain on sale of investment in a private company: Other
income, net (9,128 ) — Non-operating foreign exchange loss: Other
income, net 2,249 — Tax effects and adjustments 1,359
(26,604 ) Non-GAAP net income $ 86,518 $ 51,383
Reconciliation of
GAAP gross profit to non-GAAP:
Revenues $ 305,217 $ 251,000 GAAP gross profit 197,131 162,002 GAAP
gross margin 64.6 % 64.5 % Share-based compensation expense 684 411
Amortization of acquired intangibles 9,708 10,883
Non-GAAP gross profit $ 207,523 $ 173,296 Non-GAAP
gross margin 68.0 % 69.0 %
Reconciliation of
GAAP operating expenses to non-GAAP:
GAAP operating expenses $ 152,476 $ 150,023 Share-based
compensation expense (23,558 ) (14,563 ) Amortization of acquired
intangibles (2,036 ) (2,422 ) Acquisition and other charges (4,774
) (4,278 ) Restructuring and impairment charges (903 ) (7,587 )
Non-GAAP operating expenses $ 121,205 $ 121,173
Mellanox Technologies, Ltd. Reconciliation of
Non-GAAP Adjustments (in thousands, except per share data,
unaudited) Three Months Ended March
31, 2019 2018
Reconciliation of
GAAP income from operations to non-GAAP:
GAAP income (loss) from operations $ 44,655 $ 11,979 GAAP income
(loss) from operations % 14.6 % 4.8 % Share-based compensation
expense 24,242 14,974 Amortization of acquired intangibles 11,744
13,305 Acquisition and other charges 4,774 4,278 Restructuring
charges 903 7,587 Non-GAAP income from operations $
86,318 $ 52,123 Non-GAAP income from operations %
28.3 % 20.8 % Shares used in computing GAAP diluted earnings
per share 55,794 53,646 Adjustments: Effect of dilutive securities
under GAAP (1,567 ) (1,827 ) Total options vested and exercisable
318 821
Shares used in computing non-GAAP diluted
earnings per share
54,545 52,640 GAAP diluted net income per
share $ 0.87 $ 0.71 Adjustments: Share-based compensation expense
0.44 0.28 Amortization of acquired intangibles 0.21 0.25
Acquisition and other charges 0.09 0.08 Restructuring and
impairment charges 0.05 0.14 Gain on sale of investment in a
private company (0.16 ) — Non-operating foreign exchange loss 0.04
— Tax effects and adjustments 0.02 (0.50 ) Effect of dilutive
securities under GAAP 0.04 0.03 Total options vested and
exercisable (0.01 ) (0.01 ) Non-GAAP diluted net income per share $
1.59 $ 0.98
Mellanox Technologies, Ltd.
Condensed Consolidated Balance Sheets (in thousands,
unaudited) March 31, December 31,
2019 2018 ASSETS Current assets: Cash and cash
equivalents $ 75,352 $ 56,766 Short-term investments 477,211
381,724 Accounts receivable, net 171,718 150,625 Inventories 95,656
104,381 Other current assets 23,320 16,942 Total
current assets 843,257 710,438 Property and equipment, net 107,509
105,334 Severance assets 5,067 17,043 Intangible assets, net
166,686 179,328 Right of use assets 65,733 — Goodwill 473,916
473,916 Deferred taxes and other long-term assets 95,605
101,139 Total assets $ 1,757,773 $ 1,587,198
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 63,349 $ 70,336 Accrued liabilities 145,901
121,878 Deferred revenue 22,840 20,558 Lease liability, current
17,730 — Total current liabilities 249,820 212,772
Accrued severance 6,145 21,645 Deferred revenue 19,565 18,665 Lease
liability, long term 53,660 — Other long-term liabilities 33,673
32,468 Total liabilities 362,863 285,550
Shareholders’ equity: Ordinary shares 236 233 Additional
paid-in capital 1,023,943 982,677 Accumulated other comprehensive
income (loss) 2,322 (1,051 ) Retained earnings 368,409
319,789 Total shareholders’ equity 1,394,910
1,301,648 Total liabilities and shareholders’ equity $
1,757,773 $ 1,587,198
Mellanox
Technologies, Ltd. Condensed Consolidated Statement of Cash
Flows (in thousands, unaudited)
Three Months Ended March 31,
2019 2018 Cash flows from operating
activities: Net income $ 48,620 $ 37,843 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 23,962 26,442 Deferred income taxes —
(26,827 ) Share-based compensation 24,242 14,974 Gain on short-term
investments, net (2,758 ) (886 ) Gain on sale of investment in a
private company (9,128 ) — Impairment charges 2,544 139 Changes in
assets and liabilities: Accounts receivable (21,093 ) 11,316
Inventories 7,293 (5,654 ) Prepaid expenses and other assets (3,552
) (1,349 ) Accounts payable (7,407 ) 3,911 Accrued liabilities and
other liabilities 25,709 (4,504 ) Net cash provided by
operating activities 88,432 55,405 Cash flows from
investing activities: Purchase of severance-related insurance
policies (90 ) (317 ) Purchase of short-term investments (191,203 )
(20,899 ) Proceeds from sales and maturities of short-term
investments 99,256 37,047 Proceeds from sale of investment in a
private company 16,887 — Purchase of property and equipment (7,686
) (7,226 ) Purchase of intangible assets (1,678 ) (6,315 ) Purchase
of investments in private companies — (2,500 ) Net cash used
in investing activities (84,514 ) (210 ) Cash flows from financing
activities: Principal payments on term debt — (39,000 ) Payments on
intangible asset financings (2,303 ) (2,173 ) Proceeds from
issuances of ordinary shares through employee equity incentive
plans 17,027 14,058 Net cash provided by (used in)
financing activities 14,724 (27,115 ) Net increase in cash,
cash equivalents, and restricted cash 18,642 28,080 Cash, cash
equivalents, and restricted cash at beginning of period 64,650
70,498 Cash, cash equivalents, and restricted cash at
end of period $ 83,292 $ 98,578
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190416005921/en/
Mellanox Technologies, Ltd.
Press/Media ContactGreg CrossZonic Public
Relations+1-925-413-5327gcross@zonicgroup.com
Investor Contactir@mellanox.com
Israel PR ContactJonathan WolfJWPR Public Relations and
Communications+972-54-22-094-22yoni@jwpr.co.il
Israel IR ContactEmanuel KahanaGelbart Kahana Investor
Relations+972-3-607-47-17mano@gk-biz.com
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