Mellanox: Fiscal 1Q15 Financial Results

Mellanox Technologies, Ltd. announced financial results for its first quarter, ended March 31, 2015.

First Quarter 2015 Highlights

• Revenues were $146.7 million.
• GAAP gross margins were 72.0%.
• Non-GAAP gross margins were 73.4%.
• GAAP operating income was $15.2 million, or 10.4% of revenue.
• Non-GAAP operating income was $30.2 million, or 20.6% of revenue.
• GAAP net income was $13.7 million.
• Non-GAAP net income was $28.6 million.
• GAAP net income per diluted share was $0.29.
• Non-GAAP net income per diluted share was $0.60.
• $45.8 million in cash was provided by operating activities.
• Cash and investments totaled $432.7 million at March 31, 2015.

Financial Results

• In accordance with U.S. GAAP, the company reported revenue of $146.7 million for the first quarter, up 3.9% from $141.1 million for the fourth quarter of 2014, and up 48.2% from $99.0 million for the first quarter of 2014.
• GAAP gross margins in the first quarter of 2015 were 72.0%, compared with 70.9% in the fourth quarter of 2014 and 65.9% in the first quarter of 2014.
• Non-GAAP gross margins in the fourth quarter of 2015 were 73.4%, compared with 72.3% in the fourth quarter of 2014 and 68.8% in the first quarter of 2014.
• GAAP net income in the first quarter of 2015 was $13.7 million, or $0.29 per diluted share, compared with GAAP net loss in the fourth quarter of 2014 was $4.8 million, or $0.10 per diluted share and net loss of $11.0 million, or $0.25 per diluted share in the first quarter of 2014.
• Non-GAAP net income in the first quarter of 2015 was $28.6 million, or $0.60 per diluted share, compared with $28.0 million, or $0.59 per diluted share in the fourth quarter of 2014, and $4.9 million, or $0.11 per diluted share in the first quarter of 2014. The first quarter 2015 non-GAAP net income excludes $11.7 million of share-based compensation expense compared to $11.8 million in the fourth quarter of 2014, and $11.6 million in the first quarter of 2014. First quarter 2015 non-GAAP net income also excludes the amortization of intangible assets of $2.3 million and acquisition-related charges of $1.0 million, compared to amortization of intangible assets of $2.7 million, acquisition-related charges of $1.0 million, and a charge related to recognition of a deferred tax valuation allowance of $17.2 million in the fourth quarter of 2014, and compared to amortization expenses of acquired intangible assets of $3.5 million, and $0.7 million of acquisition-related charges for the first quarter of 2014.
• Total cash and investments at March 31, 2015 were $432.7 million compared to $389.0 million at December 31, 2014. The company generated $45.8 million in cash from operating activities in the first quarter of 2015.

“We are pleased with our financial results for the first quarter. The transition to 40GbE by some of our leading customers continued and contributed to our revenue growth. We see significant growth opportunities in the Ethernet market and are pleased that our revenue and market share have increased. Our IB solutions grew 46% over the first quarter of 2014. Today, we are the only company shipping full end-to-end 100 Gigabit solutions,” said Eyal Waldman, president and CEO of Mellanox. “We are also proud of the results that our new products achieved. During the quarter, our 100GbE solution achieved record performance, making it the highest performing solution available in the market today, and our 40GbE switches were found to have zero packet loss and lower latency compared with competitive products. Our products are changing the data center landscape and open new possibilities for our customers.“

2Q15 Guidance

• Quarterly revenues of $155 million to $160 million
• Non-GAAP gross margins of 71% to 72%
• An increase in non-GAAP operating expenses of 5% to 7%
• Share-based compensation expense of $13.0 million to $13.5 million
• Non-GAAP diluted share count of 47.6 million to 48.1 million shares