Mellanox: Fiscal 4Q17 Financial Results

Mellanox Technologies, Ltd. announced financial results for its fourth quarter and full year 2017 ended December 31, 2017.

“We are pleased to achieve record quarterly and full year revenues,” said Eyal Waldman, president and CEO. “2017 represented a year of investment and product transitions for Mellanox. Fourth quarter Ethernet revenues increased 11% sequentially, due to expanding customer adoption of our 25Gb/s and above Ethernet products across all geographies. We are encouraged by the acceleration of our 25Gb/s and above Ethernet switch business, which grew 41% sequentially, with broad based growth across OEM, hyperscale, tier-2, cloud, financial services and channel customers. During the fourth quarter, IB revenues grew 2% sequentially, driven by growth from our high-performance computing and artificial intelligence customers. For the full fiscal 2017, our revenues from the HPC market grew 13% year over year. Our 2017 results demonstrate the successful execution of our multi-year revenue diversification strategy, and our leadership position in 25Gb/s and above Ethernet adapters.”

Fourth Quarter 2017 – Highlights
• Revenues were $237.6 million in the fourth quarter, and $863.9 million in fiscal year 2017.
• GAAP gross margins were 64.1% in the fourth quarter, and 65.2% in fiscal year 2017.
• Non-GAAP gross margins were 68.8% in the fourth quarter, and 70.4% in fiscal year 2017.
• GAAP operating loss was $(6.7) million, or (2.8)% of revenue, in the fourth quarter, and was $(17.1) million, or (2.0)% of revenue, in fiscal year 2017.
• Non-GAAP operating income was $38.0 million, or 16.0% of revenue, in the fourth quarter, and $118.7 million, or 13.7% of revenue, in fiscal year 2017.
• GAAP net loss was $(2.6) million in the fourth quarter, and was $(19.4) million in fiscal year 2017.
• Non-GAAP net income was $42.9 million in the fourth quarter, and $116.6 million in fiscal year 2017.
• GAAP net loss per diluted share was $(0.05) in the fourth quarter, and $(0.39) in fiscal year 2017.
• Non-GAAP net income per diluted share was $0.82 in the fourth quarter, and $2.28 in fiscal year 2017.
• $66.9 million in cash was provided by operating activities during the fourth quarter.
• $161.3 million in cash was provided by operating activities during fiscal year 2017.
• Cash and investments totaled $273.8 million at December 31, 2017.

Waldman continued: “As we enter 2018, we expect to build on our momentum in Ethernet and IB. With the recent release of our BlueField system-on-chip, and the future introduction of our 200Gb/s IB and Ethernet products, Mellanox is well positioned to begin reaping the benefits from prior investments. Looking ahead, we anticipate seeing acceleration of revenue growth, while delivering on our commitment to more efficiently manage costs and achieve fiscal 2018 non-GAAP operating margins of 18 to 19%. We continue to drive improvements in profitability and identify further efficiencies that can be realized as our prior investments begin to yield positive results and we transition towards new product introductions in 2018 and beyond.”

First Quarter 2018 Outlook
• Quarterly revenues of $222 million to $232 million
• Non-GAAP gross margins of 68.5% to 69.5%
• Non-GAAP operating expenses of $120 million to $122 million
• Share-based compensation expense of $16.3 million to $16.8 million
• Non-GAAP diluted share count of 52.4 million to 52.9 million

Full Year 2018 Outlook
• Revenues of $970 million to $990 million
• Non-GAAP gross margins of 68.0% to 69.0%
• Non-GAAP operating margin of 18.0% to 19.0%
• Non-GAAP operating margin of more than 20.0% exiting 2018

Recent Mellanox Press Release Highlights

• January 16, 2018: Mellanox ConnectX-5 Ethernet Adapter Wins Linley Group Analyst Choice Award for Best Networking Chip
• January 9, 2018: Mellanox Discontinuing 1550nm Silicon Photonics Development Activities
• January 4, 2018: Mellanox Ships BlueField System-on-Chip Platforms and SmartNIC Adapters to Leading OEMs and Hyperscale Customers
• December 18, 2017: Meituan.com Selects Mellanox Interconnect Solutions to Accelerate its Artificial Intelligence, big data and Cloud Data Centers
• December 12, 2017: Mellanox Interconnect Solutions Accelerate Tencent Cloud High-Performance Computing and Artificial Intelligence Infrastructure
• December 4, 2017: Mellanox and NEC Partner to Deliver Innovative High-Performance and Artificial Intelligence Platforms
• November 14, 2017: Mellanox Propels NetApp to New Heights with 100Gb/s IB Connectivity
• November 13, 2017: Deployment Collaboration with Lenovo will Power Canada’s Largest Supercomputer Centre with Leading Performance, Scalability for HPC Applications
• November 13, 2017: Mellanox IB Solutions to Accelerate the World’s Next Fastest Supercomputers
• November 13, 2017: Mellanox IB to Accelerate Japan’s Fastest Supercomputer for Artificial Intelligence Applications
• November 13, 2017: IB Accelerates 77% of New High-Performance Computing Systems on TOP500 Supercomputer List