Mellanox: Fiscal 3Q18 Financial Results
Five consecutive quarters of record results
This is a Press Release edited by StorageNewsletter.com on October 26, 2018 at 2:16 pm| (in $ million) | 3Q17 | 3Q18 | 9 mo. 17 | 9 mo. 18 |
| Revenue | 225.7 | 279.2 | 626.3 | 798.7 |
| Growth | 24% | 28% | ||
| Net income (loss) | 3.4 | 37.1 | (16.8) | 91.4 |
Mellanox Technologies, Ltd. announced preliminary financial results for its third quarter 2018 ended September 30, 2018.
“Mellanox continues to execute and gain momentum in the markets we participate in. We reported another record quarter in Q3, delivering 24% revenue growth and 90% non-GAAP operating income growth year-over-year. This resulted in a non-GAAP operating margin of 26.2%,” said Eyal Waldman, president and CEO. “Our strong results reflect the differentiated and superior product technologies that Mellanox has to offer for data center infrastructure.”
“The innovations built into our high-speed Ethernet adapters, switches and cables are fueling demand for our Ethernet products. Leading hyperscale, cloud, enterprise data center and artificial intelligence customers continue to choose Mellanox to maximize the efficiency and utilization of their compute and storage investments. This has resulted in further market share gains across our high-speed Ethernet products and 59% year-over-year revenue growth in our Ethernet business. During the third quarter we released our HDR 200 Gigabit per second IB solutions to first customers and announced multiple design wins. HDR IB will enhance the performance, efficiency and scalability of high-performance computing, artificial intelligence, storage, cloud and other performance-driven applications, and deliver highest ROI for compute and storage infrastructures,” he concluded.
Third Quarter 2018 – Highlights
• Revenue of $279.2 million, an increase of 23.7%, compared to $225.7 million in 3FQ17.
• GAAP gross margins of 65.8%, compared to 65.7% in 3FQ17.
• Non-GAAP gross margins of 69.6%, compared to 70.7% in 3FQ17.
• GAAP operating income of $39.5 million, compared to $6.6 million in 3FQ17.
• Non-GAAP operating income of $73.2 million, or 26.2% of revenue, compared to $38.5 million, or 17.1% of revenue in 3FQ17.
• GAAP net income of $37.1 million, compared to $3.4 million in 3FQ17.
• Non-GAAP net income of $71.4 million, compared to $36.6 million in 3FQ17.
• GAAP net income per diluted share of $0.68, compared to $0.07 in 3FQ17.
• Non-GAAP net income per diluted share of $1.33, compared to $0.71 in 3FQ17.
• $66.4 million in cash provided by operating activities, compared to $53.0 million in 3FQ17.
• Cash and investments totaled $350.2 million at September 30, 2018, compared to $273.8 million at December 31, 2017.
Year-to-Date Highlights Through Third Quarter
• Revenue of $798.7 million, an increase of 27.5%, compared to $626.3 million in the first three quarters of 2017.
• GAAP operating income of $68.1 million, compared to operating loss of $10.4 million in the first three quarters of 2017.
• Non-GAAP operating income of $191.6 million, or 24.0% of revenue, compared to $80.6 million, or 12.9% of revenue in the first three quarters of 2017.
• GAAP benefit from taxes on income of $23.2 million, mainly due to a reversal of valuation allowance on deferred tax assets.
• GAAP net income of $91.4 million, compared to net loss of $16.8 million in the first three quarters of 2017.
• Non-GAAP net income of $189.4 million, compared to $73.6 million in the first three quarters of 2017.
• GAAP net income per diluted share of $1.68, compared to net loss per diluted share of $0.34 in the first three quarters of 2017.
• Non-GAAP net income per diluted share of $3.57, compared to $1.44 in the first three quarters of 2017.
• $168.5 million in cash provided by operating activities, compared to $94.4 million in the first three quarters of 2017.
Fourth Quarter 2018 Outlook
• Quarterly revenue of $280 million to $290 million
• Non-GAAP gross margins of 68.5% to 69.5%
• Non-GAAP operating expenses of $122 million to $124 million
• Share-based compensation expense of $22.0 million to $22.5 million
• Non-GAAP diluted share count of 54.5 million to 55.0 million
Comments
Abstract of the earnings call transcript:
Eyal Waldman, president and CEO:
"In the third quarter, our Ethernet business grew 59% year-over-year and approximately 12% sequentially, driven by strong demand for our high-speed Ethernet network adapters and LinkX cables and transceivers.
"We're proud to have shipped more than 2.1 million adapters during the first three quarters of 2018, which marked an acceleration in the adoption of 25 gigabit and above adapters.
"We expect the majority of that transition to occur over the next several years with analysts forecasting high-speed 25 gigabit and above adapters will represent more than 50% of the market by 2021.
"We continue to see good growth of our Ethernet switch business and, for the first nine month of 2018, we grew 78% versus the previous year. Despite some headwinds associated with delays in ramp timing for two customers, we forecast our switch business to grow by healthy 70% or more for the full-year.
"IB was down in the third quarter due to several deals that slid into the fourth quarter of 2018. We believe that IB sales will grow in the low-single digits in 2018 as we close these deals in the fourth quarter."
Eric Johnson, VP and corporate controller:
"Our total revenues were $279.2 million, up 4% sequentially from $268.5 million in the second quarter of 2018.
"Revenues from our IPs represented 17% of third quarter revenues. Revenues from boards were 47%, and switch system revenues accounted for 19%. Third-quarter IB revenues were $97.9 million, down 4.2% sequentially from $102.1 million in the second quarter of 2018. Revenues from our IB-based products represented 35% of revenues in Q3 2018, down from 38% of revenue in Q2 2018. Quarterly Ethernet revenues were $175.5 million, up 11.5% sequentially and up 58.6% in the third quarter of 2017. Ethernet revenues represented 63% of third-quarter revenues. We had one greater than 10% customer in third quarter. It was Dell EMC with 11% of revenues."
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