Mellanox: Fiscal 3Q11 Financial Results

(in US$ millions)	3Q10	3Q11	9 mo. 10	9 mo. 11
Revenues	37.8	68.2	113.9	186.6
*Growth*		80%		64%
Net income (loss)	3.5	4.8	14.1	5.3

Mellanox Technologies, Ltd. announced record revenue of $68.2 million for its fiscal third quarter 2011, ended September 30, 2011.

Third Quarter Highlights

Revenues were $68.2 million
GAAP gross margins were 64.5 percent; non-GAAP gross margins were 68.2 percent
GAAP operating income was $5.6 million; non-GAAP operating income was $13.9 million, or 20.3 percent of revenues
GAAP net income: $4.8 million; non-GAAP net income $13.0 million
GAAP net income per diluted share: $0.13; non-GAAP net income per diluted share $0.31
$14.9 million in cash provided by operating activities
$220.6 million in total cash and investments at September 30, 2011

Financial Results
In accordance with U.S. GAAP, the company reported revenue of $68.2 million, up 7.6 percent from $63.3 million in the second quarter of 2011, and up 80.4 percent from $37.8 million in the third quarter of 2010.

GAAP gross margins in the third quarter of 2011 were 64.5 percent, compared with 64.9 percent in the second quarter of 2011 and 73.9 percent in the third quarter of 2010.

Non-GAAP gross margins in the third quarter of 2011 were 68.2 percent, compared with 68.9 percent in the second quarter of 2011 and 74.2 percent in the third quarter of 2010.

GAAP net income in the third quarter of 2011 was $4.8 million or $0.13 per diluted share, compared with $2.1 million or $0.06 per diluted share in the second quarter of 2011, and $3.5 million or $0.10 per diluted share in the third quarter of 2010.

Non-GAAP net income in the third quarter was $13.0 million, or $0.31 per diluted share, compared with $10.3 million or $0.27 per diluted share in the second quarter of 2011, and $8.1 million, or $0.22 per diluted share in the third quarter of 2010.

The third quarter 2011 non-GAAP net income results exclude $5.6 million of share-based compensation expenses compared to $5.4 million in the second quarter of 2011, and compared to $3.6 million in the third quarter of 2010. It also excludes amortization of acquired intangible assets of $2.6 million associated with the acquisition of Voltaire, Ltd. on February 7, 2011 compared to $2.8 million of such amortization expenses in the second quarter of 2011. The third quarter 2010 non-GAAP net income also excludes $1.1 million of tax expenses related to utilization of deferred tax assets in Israel.

In September, the company conducted a follow on public offering of 3,450,000 shares and raised $109.5 million. As a result, total cash and investments were $220.6 million at September 30, 2011. The company generated $14.9 million in cash from operating activities during the quarter.

"We are proud to achieve revenue growth of 7.6 percent and non-GAAP EPS growth of 14.9 percent compared to the prior quarter, as well as non-GAAP operating income of 20.3 percent of revenues. Our product momentum in various vertical markets and applications helped us achieve record quarterly results. We see tens-of-thousands of our InfiniBand and 10 Gigabit Ethernet adapters deployed in multiple Web 2.0 applications," said Eyal Waldman, chairman, president and CEO of Mellanox Technologies. "I am pleased to announce that our FDR 56Gb/s InfiniBand and 40 Gigabit Ethernet I/O solutions are now generally available and have started shipping to our customers. New server and storage clusters, deployed with our FDR InfiniBand adapters with PCI Express 3.0, are demonstrating record results in terms of bandwidth, latency and overall return-on-investment. We are excited by the business prospects of these products and the benefits they bring to our HPC, enterprise, financial services, Web 2.0 and cloud data center end-user base."