Mellanox Announces First Quarter Financial Results 

Mellanox Technologies, Ltd., a leading supplier of end-to-end interconnect solutions for servers and storage systems, today 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 percent.
• Non-GAAP gross margins were 73.4 percent.
• GAAP operating income was $15.2 million, or 10.4 percent of revenue.
• Non-GAAP operating income was $30.2 million, or 20.6 percent 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. generally accepted accounting principles (GAAP), the company reported revenue of $146.7 million for the first quarter, up 3.9 percent from $141.1 million for the fourth quarter of 2014, and up 48.2 percent from $99.0 million for the first quarter of 2014.

GAAP gross margins in the first quarter of 2015 were 72.0 percent, compared with 70.9 percent in the fourth quarter of 2014 and 65.9 percent in the first quarter of 2014.

Non-GAAP gross margins in the fourth quarter of 2015 were 73.4 percent, compared with 72.3 percent in the fourth quarter of 2014 and 68.8 percent 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 40 Gigabit Ethernet 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 InfiniBand solutions grew 46 percent 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 Technologies. “We are also proud of the results that our new products achieved. During the quarter, our 100 Gigabit solution achieved record performance, making it the highest performing solution available in the market today, and our 40 Gigabit per second Ethernet 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.”

Second Quarter 2015 Guidance

Our guidance for second quarter 2015 non-GAAP results is as follows:

• Quarterly revenues of $155 million to $160 million
• Non-GAAP gross margins of 71 percent to 72 percent
• An increase in non-GAAP operating expenses of 5 percent to 7 percent
• 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

Conference Calls

Mellanox will hold its first quarter 2015 financial results conference call today at 5 a.m. Pacific Time to discuss the company’s financial results. To listen to the call, dial +1-785-424-1676 approximately 10 minutes prior to the start time.

The Mellanox financial results conference call will be available via live webcast on the investor relations section of the Mellanox website at http://ir.mellanox.com. Access the webcast 15 minutes prior to the start of the call to download and install any necessary audio software. Replay of the webcast will also be available on the Mellanox website.