Achieved $429 million of revenue, up 13% vs.
prior quarter and 40% year-over-year
GAAP operating margin 23.9%; Non-GAAP operating
margin 34.1%
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 2020.
“Mellanox delivered record revenue and operating income in the
first quarter of 2020. All our major product lines continued to
grow. We are pleased to be shipping end-to-end solutions at speeds
of 200 gigabits per second (Gbps) for both InfiniBand and Ethernet.
In addition, we are shipping 400 Gbps Ethernet switches,” said Eyal
Waldman, President and CEO of Mellanox Technologies. “Sales of
Ethernet adapter products increased 112% year-over-year. We expect
our new ConnectX-6 Dx adapters and Bluefield-2 I/O Processing Units
(IPUs), the latest additions to our industry leading family of
Smart NICs, to bring unprecedented security and co-processing
capabilities to enterprise and cloud data centers. These
capabilities will be further strengthened by our recent acquisition
of Titan IC, the leading developer of network intelligence and
security technology to accelerate search and big data analytics
across a broad range of applications in data centers worldwide. The
product line revenue of our Spectrum ASIC based Ethernet switch
business grew 66% year-over-year. We recently began shipping
Spectrum-3 based switches, the world’s first 12.8 Tbps networking
platforms optimized for cloud, storage, and artificial
intelligence,” continued Waldman.
“We are experiencing very strong adoption of InfiniBand for
hyperscale artificial intelligence and cloud environments,
resulting in tens of thousands of compute nodes connected with
InfiniBand, which demonstrates the superior performance and
scalability of InfiniBand. We saw 27% year-over-year growth in
InfiniBand, led by strong demand for our HDR 200 gigabit solutions.
HDR InfiniBand has been selected to interconnect national Exascale
programs, large scale artificial intelligence and cloud platforms,
and enterprise compute and storage infrastructures. We are proud
that our InfiniBand technology is being utilized by many of the
supercomputers in the Covid-19 High-Performance Computing
Consortium, which is helping to aggregate computing capabilities
for researchers to execute complex computations to help fight the
novel Corona virus,” continued Waldman. “We are excited to
participate in such important global initiatives through the
adoption of our industry-leading adapters, switches, cables, and
software, while also delivering strong financial performance for
the first quarter of 2020.”
First Quarter 2020 - Financial Results Summary
- Revenue of $428.7 million in the first quarter, an increase of
40.5 percent, compared to $305.2 million in the first quarter of
2019.
- GAAP gross margins of 66.8 percent in the first quarter,
compared to 64.6 percent in the first quarter of 2019.
- Non-GAAP gross margins of 69.1 percent in the first quarter,
compared to 68.0 percent in the first quarter of 2019.
- GAAP operating income of $102.3 million in the first quarter,
or 23.9 percent of revenue, compared to $44.7 million, or 14.6
percent of revenue in the first quarter of 2019.
- Non-GAAP operating income of $146.2 million in the first
quarter, or 34.1 percent of revenue, compared to $86.3 million, or
28.3 percent of revenue in the first quarter of 2019.
- GAAP net income of $105.9 million in the first quarter,
compared to $48.6 million in the first quarter of 2019.
- Non-GAAP net income of $145.6 million in the first quarter,
compared to $86.5 million in the first quarter of 2019.
- GAAP net income per diluted share of $1.84 in the first
quarter, compared to $0.87 in the first quarter of 2019.
- Non-GAAP net income per diluted share of $2.59 in the first
quarter, compared to $1.59 in the first quarter of 2019.
- $79.2 million in cash provided by operating activities in the
first quarter, compared to $88.4 million in the first quarter of
2019.
- Cash and short-term investments totaled $938.0 million at March
31, 2020, compared to $875.9 million at December 31, 2019.
Mellanox Acquisition by NVIDIA
On April 16, 2020 NVIDIA Corporation announced that it has
received approval from all necessary authorities to proceed with
its planned acquisition of Mellanox. Closing of the acquisition is
expected to occur on or about April 27, 2020. 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 9, 2020
Mellanox Delivers Spectrum-3 Based
Ethernet Switches - First 12.8 Tbps Networking Platforms Optimized
for Cloud, Storage, and AI
•
March 3, 2020
Mellanox to Acquire World Leading Network
Intelligence Technology Developer Titan IC to Strengthen Leadership
in Security and Data Analytics
•
February 24, 2020
Revolutionary Mellanox ConnectX-6 Dx
SmartNICs and BlueField-2 I/O Processing Units Transform Cloud and
Data Center Security
•
January 29, 2020
Mellanox Delivers Record Fourth Quarter
and Annual 2019 Financial Results
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 23, 2020.
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 investments in privately-held companies,
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, 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
investments in privately-held companies represents the realized
gains related to these investments. 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 income and expense items and the non-cash impact on
the tax provision pertaining to changes in deferred tax assets
associated with carryforward losses. Shares used in computing
non-GAAP diluted earnings per share represents GAAP basic shares
plus total options vested and exercisable. The company believes the
non-GAAP results provide useful information to both management and
investors, as these non-GAAP results exclude income and 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
investments in privately-held companies, 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 2020 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 20, 2020. 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,
2020
2019
Total revenues
$
428,746
$
305,217
Cost of revenues
142,550
108,086
Gross profit
286,196
197,131
Operating expenses:
Research and development
122,426
92,205
Sales and marketing
44,209
40,097
General and administrative
17,297
19,271
Restructuring and impairment charges
—
903
Total operating expenses
183,932
152,476
Income from operations
102,264
44,655
Interest and other, net
12,672
8,231
Income before taxes on income
114,936
52,886
Provision for taxes on income
9,048
4,266
Net income
$
105,888
$
48,620
Net income per share — basic
$
1.89
$
0.90
Net income per share — diluted
$
1.84
$
0.87
Shares used in computing net income per
share:
Basic
56,020
54,227
Diluted
57,449
55,794
Mellanox Technologies,
Ltd.
Reconciliation of Non-GAAP
Adjustments
(in thousands, except
percentages, unaudited)
Three Months Ended March
31,
2020
2019
Reconciliation of GAAP net income to
non-GAAP:
GAAP net income
$
105,888
$
48,620
Adjustments:
Share-based compensation expense:
Cost of revenues
1,056
684
Research and development
17,403
13,241
Sales and marketing
7,537
5,652
General and administrative
5,852
4,665
Total share-based compensation expense
31,848
24,242
Amortization of acquired intangibles:
Cost of revenues
9,158
9,708
Research and development
206
192
Sales and marketing
1,590
1,844
Total amortization of acquired
intangibles
10,954
11,744
Acquisition and other charges:
Cost of revenues
3
—
Research and development
—
90
Sales and marketing
31
30
General and administrative
1,080
4,654
Total acquisition and other charges
1,114
4,774
Restructuring and impairment charges:
Operating expense
—
903
Interest and other, net
—
1,755
Total restructuring and impairment
charges
—
2,658
Gain on investments in privately-held
companies:
Interest and other, net
(5,207
)
(9,128
)
Non-operating foreign exchange (gain)
loss:
Interest and other, net
(3,061
)
2,249
Tax effects and adjustments
4,096
1,359
Non-GAAP net income
$
145,632
$
86,518
Reconciliation of
GAAP gross profit to non-GAAP:
Revenues
$
428,746
$
305,217
GAAP gross profit
286,196
197,131
GAAP gross margin
66.8
%
64.6
%
Share-based compensation expense
1,056
684
Amortization of acquired intangibles
9,158
9,708
Acquisition and other charges
3
—
Non-GAAP gross profit
$
296,413
$
207,523
Non-GAAP gross margin
69.1
%
68.0
%
Mellanox Technologies,
Ltd.
Reconciliation of Non-GAAP
Adjustments
(in thousands, except per
share data, unaudited)
Three Months Ended March
31,
2020
2019
Reconciliation of
GAAP operating expenses to non-GAAP:
GAAP operating expenses
$
183,932
$
152,476
Share-based compensation expense
(30,792
)
(23,558
)
Amortization of acquired intangibles
(1,796
)
(2,036
)
Acquisition and other charges
(1,111
)
(4,774
)
Restructuring and impairment charges
—
(903
)
Non-GAAP operating expenses
$
150,233
$
121,205
Reconciliation of
GAAP income from operations to non-GAAP:
GAAP income from operations
$
102,264
$
44,655
GAAP income from operations %
23.9
%
14.6
%
Share-based compensation expense
31,848
24,242
Amortization of acquired intangibles
10,954
11,744
Acquisition and other charges
1,114
4,774
Restructuring and impairment charges
—
903
Non-GAAP income from operations
$
146,180
$
86,318
Non-GAAP income from operations %
34.1
%
28.3
%
Shares used in computing GAAP diluted
earnings per share
57,449
55,794
Adjustments:
Effect of dilutive securities under
GAAP
(1,429
)
(1,567
)
Total options vested and exercisable
244
318
Shares used in computing non-GAAP diluted
earnings per share
56,264
54,545
GAAP diluted net income per share
$
1.84
$
0.87
Adjustments:
Share-based compensation expense
0.55
0.44
Amortization of acquired intangibles
0.19
0.21
Acquisition and other charges
0.02
0.09
Restructuring and impairment charges
—
0.05
Gain on investments in privately-held
companies:
(0.09
)
(0.16
)
Non-operating foreign exchange (gain)
loss
(0.04
)
0.04
Tax effects and adjustments
0.07
0.02
Effect of dilutive securities under
GAAP
0.06
0.04
Total options vested and exercisable
(0.01
)
(0.01
)
Non-GAAP diluted net income per share
$
2.59
$
1.59
Mellanox Technologies,
Ltd.
Condensed Consolidated Balance
Sheets
(in thousands,
unaudited)
March 31,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
167,075
$
77,579
Short-term investments
770,909
798,318
Accounts receivable, net
269,251
229,873
Inventories
140,080
98,030
Other current assets
18,725
17,430
Total current assets
1,366,040
1,221,230
Property and equipment, net
126,864
113,568
Intangible assets, net
159,014
152,053
Goodwill
494,985
473,916
Deferred taxes and other long-term
assets
154,422
159,022
Total assets
$
2,301,325
$
2,119,789
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
141,811
$
105,328
Accrued and other liabilities
174,766
196,527
Deferred revenue
27,567
24,962
Total current liabilities
344,144
326,817
Deferred revenue
32,422
27,481
Other long-term liabilities
119,085
109,646
Total liabilities
495,651
463,944
Shareholders’ equity:
Ordinary shares
244
242
Additional paid-in capital
1,174,398
1,126,829
Accumulated other comprehensive income
(loss)
(1,043
)
2,587
Retained earnings
632,075
526,187
Total shareholders’ equity
1,805,674
1,655,845
Total liabilities and shareholders'
equity
$
2,301,325
$
2,119,789
Mellanox Technologies,
Ltd.
Condensed Consolidated
Statement of Cash Flows
(in thousands,
unaudited)
Three months Ended March
31,
2020
2019
Cash flows from operating activities:
Net income
$
105,888
$
48,620
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
25,100
23,962
Share-based compensation
31,848
24,242
Gain on short-term investments, net
(4,478
)
(2,758
)
Gain on investments in privately-held
companies
(5,207
)
(9,128
)
Impairment charges and loss on disposal of
property and equipment
324
2,544
Changes in assets and liabilities, net of
effect of acquisition:
Accounts receivable
(39,311
)
(21,093
)
Inventories
(43,669
)
7,293
Prepaid expenses and other assets
1,221
(3,552
)
Accounts payable
27,541
(7,407
)
Accrued and other liabilities
(20,066
)
25,709
Net cash provided by operating
activities
79,191
88,432
Cash flows from investing activities:
Purchase of short-term investments
(172,884
)
(191,203
)
Proceeds from sales and maturities of
short-term investments
203,575
99,256
Purchase of property and equipment, net of
proceeds from sales
(7,793
)
(7,686
)
Purchase of intangibles and other
assets
(5,447
)
(1,768
)
Proceeds from sale of an investment in a
privately-held company
7,793
16,887
Purchase of investments in privately-held
companies
(1,423
)
—
Acquisition, net of cash acquired
(20,708
)
—
Net cash provided by (used in) investing
activities
3,113
(84,514
)
Cash flows from financing activities:
Payments on intangible asset
financings
(8,531
)
(2,303
)
Proceeds from issuances of ordinary shares
through employee equity incentive plans
15,723
17,027
Net cash provided by financing
activities
7,192
14,724
Net increase in cash, cash equivalents,
and restricted cash
89,496
18,642
Cash, cash equivalents, and restricted
cash at beginning of period
77,579
64,650
Cash, cash equivalents, and restricted
cash at end of period
$
167,075
$
83,292
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200423005318/en/
Investor Contact ir@mellanox.com
Israel Investor Contact Keren Goldberg Gelbart Kahana
Investor Relations +972 52 387 4111 kereng@gk-biz.com
Mellanox Technologies (NASDAQ:MLNX)
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