Mellanox Announces Second Quarter Results

SUNNYVALE, Calif. & YOKNEAM, Israel, Jul. 18, 2018 — Mellanox Technologies, Ltd. (NASDAQ: MLNX), a leading supplier of high-performance, end-to-end interconnect solutions for data center servers and storage systems, has announced financial results for its second quarter 2018 ended June 30, 2018.

“Mellanox has achieved another record financial performance in the second quarter 2018. Our strong revenue growth reflects years of investment in 25 gigabit per second and above Ethernet and InfiniBand technologies. Our record profitability demonstrates the leverage we are producing in the business by focusing our investments in the right products,” said Eyal Waldman, President and CEO of Mellanox Technologies. “We continue to see strong traction with our 25 gigabit per second and above solutions as they become the preferred solution of choice in hyperscale, cloud, high performance computing, artificial intelligence, storage, financial services and other markets across the globe. Our Ethernet revenue grew 81 percent year-over-year driven by network adapter and switch growth with hyperscale and OEM customers. We are proud to see our InfiniBand solutions accelerate the world’s top three and four of the top five supercomputers, as seen in the recently published TOP500 supercomputers list. Our performance in the second quarter further shows the benefit of our investment in diversifying our revenue base and the operational focus that is driving our higher profitability.”

Second Quarter 2018 – Highlights

• Revenue of $268.5 million, an increase of 26.7 percent, compared to$212.0 million in the second quarter of 2017.
• GAAP gross margins of 61.4 percent in the second quarter, compared to 65.4 percent in the second quarter of 2017.
• Non-GAAP gross margins of 69.1 percent in the second quarter, compared to 70.6 percent in the second quarter of 2017.
• GAAP operating income of $16.6 million, compared to operating loss of$4.4 million in the second quarter of 2017.
• Non-GAAP operating income of $66.2 million, or 24.7 percent of revenue, compared to $26.5 million, or 12.5 percent of revenue in the second quarter of 2017.
• GAAP net income of $16.5 million, compared to net loss of $8.0 million in the second quarter of 2017.
• Non-GAAP net income of $66.6 million, compared to $22.4 million in the second quarter of 2017.
• GAAP net income per diluted share of $0.30 in the second quarter, compared to net loss per diluted share of $0.16 in the second quarter of 2017.
• Non-GAAP net income per diluted share of $1.25 in the second quarter, compared to $0.44 in the second quarter of 2017.
• $46.7 million in cash provided by operating activities, compared to $6.4 million in the second quarter of 2017.
• Cash and investments totaled $282.6 million at June 30, 2018, compared to $273.8 million at December 31, 2017.

First Half 2018 – Highlights

• Revenue of $519.5 million, an increase of 29.7 percent, compared to$400.6 million in the first half of 2017.
• GAAP operating income of $28.5 million, compared to operating loss of$17.0 million in the first half of 2017.
• Non-GAAP operating income of $118.4 million, or 22.8 percent of revenue, compared to $42.1 million, or 10.5 percent of revenue in first half of 2017.
• GAAP benefit from taxes on income of $26.7 million, mainly due to a reversal of valuation allowance on deferred tax assets.
• GAAP net income of $54.4 million, compared to net loss of $20.2 millionin the first half of 2017.
• Non-GAAP net income of $118.0 million, compared to $37.0 million in the first half of 2017.
• GAAP net income per diluted share of $1.00, compared to net loss per diluted share of $0.41 in the first half of 2017.
• Non-GAAP net income per diluted share of $2.23, compared to $0.73 in the first half of 2017.
• $102.1 million in cash provided by operating activities, compared to $41.4 million in the first half of 2017.

Eyal Waldman continued, “In the first half of 2018 our revenue growth has proven the value of our investments and we look forward to continuing our momentum into the second half of the year. We grew our revenue almost 30% in the first half and more than doubled our non-GAAP operating income year over year. We expect our margin expansion to continue with further revenue growth and operational efficiency. We are confident that our strategy, investments and innovation will continue to produce market-leading products that drive growth for Mellanox for the rest of 2018 and beyond.”

Third Quarter 2018 Outlook

We currently project:

• Quarterly revenue of $270 million to $280 million
• Non-GAAP gross margins of 68.5 percent to 69.5 percent
• Non-GAAP operating expenses of $122 million to $124 million
• Share-based compensation expense of $19.0 million to $19.5 million
• Non-GAAP diluted share count of 53.5 million to 54.0 million

Full Year 2018 Outlook

We currently project:

• Revenue of $1,065 million to $1,085 million
• Non-GAAP gross margins of 68.5 percent to 69.5 percent
• Non-GAAP operating margin of 23.0 percent to 24.0 percent

Recent Mellanox Press Release Highlights

Conference Call

Mellanox will hold its second quarter 2018 financial results conference call today, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), to discuss the company’s financial results. To listen to the call, dial +1-877-876-9176, or for investors outside the U.S., +1-785-424-1667, 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. A replay of the webcast will also be available on the Mellanox website after the call.

About Mellanox

Mellanox Technologies (NASDAQ: MLNX) is a leading supplier of end-to-end Ethernet and InfiniBand smart interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. Mellanox offers a choice of fast interconnect products: adapters, switches, software and silicon that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage and financial services. More information is available at: www.mellanox.com.

Source: Mellanox