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8-K - 8-K - Mellanox Technologies, Ltd.a13-22670_18k.htm

Exhibit 99.1

 

PRESS RELEASE

GRAPHIC

 

 

Mellanox Technologies, Ltd.

 

Press/Media Contact

Ashley Paula

Waggener Edstrom

+1-415-547-7024

apaula@waggeneredstrom.com

 

USA Investor Contact

Gwyn Lauber

Mellanox Technologies

+1-408-916-0012

gwyn@mellanox.com

 

Israel Investor Contact

Nava Ladin

Gelbart Kahana Investor Relations

+972-3-6074717

nava@gk-biz.com

 

 

Mellanox Technologies, Ltd. Announces Third Quarter 2013 Financial Results

 

Completes acquisitions of Kotura, Inc. and IPtronics A/S

 

SUNNYVALE, Calif. and YOKNEAM, ISRAEL — October 23, 2013 — Mellanox® Technologies, Ltd. (NASDAQ: MLNX), a leading supplier of end-to-end interconnect solutions for servers and storage systems, today announced financial results for its third quarter 2013, ended September 30, 2013.

 

Third Quarter 2013 Highlights

 

·                  Revenues were $104.1 million

 

·                  GAAP gross margins were 64.4 percent

 

·                  Non-GAAP gross margins were 69.0 percent

 

·                  GAAP operating loss was $4.8 million

 

·                  Non-GAAP operating income was $13.7 million

 

·                  GAAP net loss was $5.4 million

 



 

·                  Non-GAAP net income was $13.1 million

 

·                  GAAP net loss per diluted share was $0.12

 

·                  Non-GAAP net income per diluted share was $0.29

 

·                  $16.4 million in cash was provided by operating activities

 

·                  Total cash and investments was $306.4 million at September 30, 2013

 

Financial Results

 

In accordance with U.S. generally accepted accounting principles (GAAP), the company reported revenue of $104.1 million for the third quarter of 2013, up 6.0 percent from $98.2 million in the second quarter of 2013, and down 33.5 percent from $156.5 million in the third quarter of 2012.

 

GAAP gross margins in the third quarter of 2013 were 64.4 percent, compared with 67.2 percent in the second quarter of 2013, and 69.1 percent in the third quarter of 2012.

 

Non-GAAP gross margins in the third quarter of 2013 were 69.0 percent, compared with 69.4 percent in the second quarter of 2013, and 70.5 percent in the third quarter of 2012.

 

GAAP net loss in the third quarter of 2013 was $5.4 million, or $0.12 per diluted share, compared with GAAP net loss of $1.7 million, or $0.04 per diluted share in the second quarter of 2013, and GAAP net income of $48.4 million, or $1.09 per diluted share in the third quarter of 2012.

 

Non-GAAP net income in the third quarter of 2013 was $13.1 million, or $0.29 per diluted share, compared with $13.8 million, or $0.30 per diluted share in the second quarter of 2013, and $60.1 million, or $1.37 per diluted share in the third quarter of 2012. The third quarter 2013 non-GAAP net income excludes $11.9 million of share-based compensation expenses compared to $11.2 million in the second quarter of 2013, and compared to $9.4 million in the third quarter of 2012. The third quarter 2013 non-GAAP net income also excludes amortization of acquired intangible assets of $4.6 million and $2.0 million of acquisition related charges associated with the acquisition of Kotura, Inc. and IPtronics A/S, compared to amortization expenses of acquired intangible assets of $2.5 million and acquisition related charges associated with the acquisition of Kotura, Inc. and IPtronics A/S of

 

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$1.8 million in the second quarter of 2013, and compared to $2.3 million of amortization expenses of acquired intangibles assets in the third quarter of 2012.

 

Total cash and investments were $306.4 million at September 30, 2013, compared to $411.3 million at June 30, 2013. The company paid $123.5 million in cash for its acquisitions of Kotura, Inc. and IPtronics A/S, and generated $16.4 million in cash from operating activities in the third quarter.

 

“We completed our acquisitions of Kotura and IPtronics in the third quarter, and the integration of these teams and their advanced silicon photonics technologies is going very well,” said Eyal Waldman, president and CEO of Mellanox Technologies. “These technologies will help Mellanox to continue to lead the fast interconnect market with our InfiniBand and Ethernet offerings, and to offer market-leading solutions for high-performance computing, Web 2.0, cloud, storage, database and financial applications. We are experiencing good momentum around our end-to-end Ethernet technologies in various market segments.”

 

Recent Mellanox Press Release Highlights

 

·                  Oct. 21- Mellanox Opens Messaging Accelerator Source Code to Developer Community

 

·                  Oct. 14 - Mellanox Virtual Protocol Interconnect Solution Powers Pensions First’s Private Cloud Business Intelligence Platform Built on Windows Server 2012 R2

 

·                  Oct. 14 - Mellanox RDMA Interconnect Solution Increases Data Center Productivity with Microsoft Windows Server 2012 R2

 

·                  Sept. 23 - Mellanox Announces General Availability of MetroX Solutions

 

·                  Sept. 10 - Mellanox End-to-End FDR 56Gb/s InfiniBand Solution Provides Leading Application Performance with the New Intel® Xeon® Processor E5-2600 v2 Product Family

 

·                  Aug. 27 - BaltInfoCom Selects Mellanox 40GbE as Ethernet Switch of Choice

 

·                  Aug. 26 - Mellanox and Micron Announce 40 Gigabit Ethernet Flash Storage Solution to Accelerate Storage in Virtualized Data Centers

 

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·                  Aug 26 - Mellanox and LSI Corporation Introduce Low-Latency Storage Solution to Accelerate Virtual Desktop Infrastructure Workload Performance

 

·                  Aug. 26 - Mellanox 40 Gigabit Ethernet Drivers Now Integrated in VMware vSphere® 5.5

 

·                  Aug. 15 - Mellanox Technologies, Ltd. Completes Acquisition of Kotura, Inc.

 

Conference Calls

 

Mellanox will broadcast its third quarter 2013 financial results conference call today at 2 p.m. Pacific Time (5 p.m. Eastern Time). To listen to the call, dial +1-785-424-1825 approximately ten minutes prior to the start time.

 

The Mellanox financial results conference call will be available via a 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.

 

About Mellanox

 

Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet 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 capability. Mellanox offers a choice of fast interconnect products: adapters, switches, software, cables 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.

 

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 expenses and acquisition related expenses. The company believes the non-GAAP results provide useful information to both management and investors, as these non-GAAP results exclude expenses that are not indicative of our core operating results. Management believes it is useful to exclude share-based compensation expenses, amortization of acquired intangibles and acquisition related expenses 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 and amortization of acquired intangibles 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

 

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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 “Investors” section at our web site.

 

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. 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, and our ability to protect our intellectual property rights. Furthermore, the majority of our quarterly revenues 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.

 

More information about the risks, uncertainties and assumptions that may impact our business is set forth in our form 10-Q filed with the SEC on August 2, 2013, and our form 10-K filed with the SEC on February 25, 2013. 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.

 

Mellanox is a registered trademark of Mellanox Technologies, Ltd. All other trademarks are property of their respective owners.

 

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Mellanox Technologies, Ltd.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

104,067

 

$

156,471

 

$

285,315

 

$

378,681

 

Cost of revenues

 

37,027

 

48,375

 

98,143

 

118,963

 

Gross profit

 

67,040

 

108,096

 

187,172

 

259,718

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

44,185

 

36,229

 

121,203

 

102,845

 

Sales and marketing

 

18,071

 

16,451

 

51,282

 

45,066

 

General and administrative

 

9,600

 

6,212

 

27,132

 

17,405

 

Total operating expenses

 

71,856

 

58,892

 

199,617

 

165,316

 

Income (loss) from operations

 

(4,816

)

49,204

 

(12,445

)

94,402

 

Other income, net

 

482

 

585

 

927

 

990

 

Income (loss) before taxes

 

(4,334

)

49,789

 

(11,518

)

95,392

 

Provision for taxes on income

 

(1,080

)

(1,386

)

(4,092

)

(2,454

)

Net income (loss)

 

$

(5,414

)

$

48,403

 

$

(15,610

)

$

92,938

 

Net income (loss) per share — basic

 

$

(0.12

)

$

1.16

 

$

(0.36

)

$

2.27

 

Net income (loss) per share — diluted

 

$

(0.12

)

$

1.09

 

$

(0.36

)

$

2.13

 

Shares used in computing income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

43,579

 

41,871

 

43,257

 

40,923

 

Diluted

 

43,579

 

44,434

 

43,257

 

43,595

 

 

6



 

Mellanox Technologies, Ltd.

Reconciliation of Non-GAAP Adjustments

(in thousands, percentages, unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP net income (loss) to non-GAAP:

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

(5,414

)

$

48,403

 

$

(15,610

)

$

92,938

 

Adjustments:

 

 

 

 

 

 

 

 

 

Share-based compensation expense:

 

 

 

 

 

 

 

 

 

Cost of revenues

 

461

 

406

 

1,359

 

1,176

 

Research and development

 

6,898

 

4,883

 

19,148

 

13,583

 

Sales and marketing

 

2,407

 

2,476

 

6,873

 

6,179

 

General and administrative

 

2,166

 

1,604

 

6,092

 

4,118

 

Total share-based compensation expense

 

11,932

 

9,369

 

33,472

 

25,056

 

Amortization of acquired intangibles:

 

 

 

 

 

 

 

 

 

Cost of revenues

 

3,570

 

1,879

 

7,230

 

5,671

 

Research and development

 

164

 

 

339

 

 

Sales and marketing

 

837

 

439

 

1,912

 

1,317

 

Total amortization of acquired intangibles

 

4,571

 

2,318

 

9,481

 

6,988

 

Acquisition related charges:

 

 

 

 

 

 

 

 

 

Cost of revenues

 

699

 

 

699

 

 

Research and development

 

333

 

 

333

 

 

Sales and marketing

 

261

 

 

261

 

 

General and administrative

 

672

 

 

2,500

 

 

Total acquisition related charges

 

1,965

 

 

3,793

 

 

Non-GAAP net income

 

$

13,054

 

$

60,090

 

$

31,136

 

$

124,982

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP gross profit to non-GAAP:

 

 

 

 

 

 

 

 

 

Revenues

 

$

104,067

 

$

156,471

 

$

285,315

 

$

378,681

 

GAAP gross profit

 

67,040

 

108,096

 

187,172

 

259,718

 

GAAP gross margin

 

64.4

%

69.1

%

65.6

%

68.6

%

Share-based compensation expense

 

461

 

406

 

1,359

 

1,176

 

Amortization of acquired intangibles

 

3,570

 

1,879

 

7,230

 

5,671

 

Acquisition related charges

 

699

 

 

699

 

 

Non-GAAP gross profit

 

$

71,770

 

$

110,381

 

$

196,460

 

$

266,565

 

Non-GAAP gross margin

 

69.0

%

70.5

%

68.9

%

70.4

%

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP operating expenses to non-GAAP:

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

71,856

 

$

58,892

 

$

199,617

 

$

165,316

 

Share-based compensation expense

 

(11,471

)

(8,963

)

(32,113

)

(23,880

)

Amortization of acquired intangibles

 

(1,001

)

(439

)

(2,251

)

(1,317

)

Acquisition related charges

 

(1,266

)

 

(3,094

)

 

Non-GAAP operating expenses

 

$

58,118

 

$

49,490

 

$

162,159

 

$

140,119

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP income (loss) from operations to non-GAAP:

 

 

 

 

 

 

 

 

 

GAAP income (loss) from operations

 

$

(4,816

)

$

49,204

 

$

(12,445

)

$

94,402

 

Share-based compensation expense

 

11,932

 

9,369

 

33,472

 

25,056

 

Amortization of acquired intangibles

 

4,571

 

2,318

 

9,481

 

6,988

 

Acquisition related charges

 

1,965

 

 

3,793

 

 

Non-GAAP income from operations

 

$

13,652

 

$

60,891

 

$

34,301

 

$

126,446

 

 

7



 

Mellanox Technologies, Ltd.

Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP diluted earnings per share

 

43,579

 

44,434

 

43,257

 

43,595

 

Adjustments:

 

 

 

 

 

 

 

 

 

Effect of dilutive securities under GAAP*

 

 

(2,563

)

 

(2,672

)

Total options vested and exercisable

 

1,911

 

1,871

 

1,911

 

1,871

 

Shares used in computing non-GAAP diluted earnings per share

 

45,490

 

43,742

 

45,168

 

42,794

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income (loss) per share

 

$

(0.12

)

$

1.09

 

$

(0.36

)

$

2.13

 

Adjustments:

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

0.27

 

0.21

 

0.77

 

0.57

 

Amortization of acquired intangibles

 

0.10

 

0.05

 

0.22

 

0.16

 

Acquisition related charges

 

0.05

 

0.00

 

0.09

 

0.00

 

Effect of dilutive securities under GAAP*

 

0.00

 

0.08

 

0.00

 

0.19

 

Total options vested and exercisable

 

(0.01

)

(0.06

)

(0.03

)

(0.13

)

Non-GAAP diluted income per share

 

$

0.29

 

$

1.37

 

$

0.69

 

$

2.92

 

 


* This adjustment adds back the GAAP effect of additional ordinary shares that would have been outstanding if the dilutive potential ordinary shares from stock options had been issued under the Treasury method.

 

8



 

Mellanox Technologies, Ltd.

Condensed Consolidated Balance Sheets

(in thousands, unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

37,878

 

$

117,054

 

Short-term investments

 

257,672

 

302,593

 

Restricted cash

 

3,527

 

3,229

 

Accounts receivable, net

 

73,833

 

58,516

 

Inventories

 

32,470

 

43,318

 

Deferred taxes and other current assets

 

16,232

 

15,616

 

Total current assets

 

421,612

 

540,326

 

Property and equipment, net

 

68,931

 

62,375

 

Severance assets

 

10,282

 

8,907

 

Intangible assets, net

 

57,886

 

16,134

 

Goodwill

 

199,558

 

132,885

 

Deferred taxes and other long-term assets

 

28,656

 

10,419

 

Total assets

 

$

786,925

 

$

771,046

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

24,754

 

$

37,431

 

Accrued liabilities

 

44,416

 

57,879

 

Deferred revenue

 

13,529

 

12,018

 

Capital lease liabilities, current

 

1,246

 

1,253

 

Total current liabilities

 

83,945

 

108,581

 

Accrued severance

 

13,274

 

11,821

 

Deferred revenue

 

9,179

 

8,366

 

Capital lease liabilities

 

1,882

 

2,835

 

Other long-term liabilities

 

17,579

 

11,635

 

Total liabilities

 

125,859

 

143,238

 

Shareholders’ equity:

 

 

 

 

 

Ordinary shares

 

184

 

178

 

Additional paid-in capital

 

538,198

 

488,365

 

Accumulated other comprehensive income

 

1,823

 

2,794

 

Retained earnings

 

120,861

 

136,471

 

Total shareholders’ equity

 

661,066

 

627,808

 

Total liabilities and shareholders’ equity

 

$

786,925

 

$

771,046

 

 

9



 

Mellanox Technologies, Ltd.

Condensed Consolidated Statement of Cash Flows

(in thousands, unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

(15,610

)

$

92,938

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

25,439

 

17,092

 

Deferred income taxes

 

(2,403

)

(4,449

)

Share-based compensation

 

33,472

 

25,056

 

Gain on investments

 

(710

)

(384

)

Excess tax benefit from share-based compensation

 

(2,796

)

(2,919

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

(12,137

)

(4,335

)

Inventories

 

12,942

 

(9,946

)

Prepaid expenses and other assets

 

699

 

(3,286

)

Accounts payable

 

(8,896

)

9,947

 

Accrued liabilities and other payables

 

(8,723

)

37,387

 

Net cash provided by operating activities

 

21,277

 

157,101

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Acquisition of Kotura, Inc., net of cash acquired of $101

 

(80,671

)

 

Acquisition of IPtronics A/S., net of cash acquired of $2,077

 

(42,848

)

 

Purchase of severance-related insurance policies

 

(632

)

(581

)

Purchases of short-term investments

 

(151,535

)

(234,725

)

Proceeds from sale of short-term investments

 

133,435

 

6,201

 

Proceeds from maturities of short-term investments

 

63,947

 

21,363

 

Decrease (increase) in restricted cash deposits

 

(3,943

)

94

 

Purchase of property and equipment

 

(24,050

)

(20,921

)

Purchase of intangibles

 

(6,440

)

 

Purchase of equity investment in private companies

 

(3,123

)

(1,424

)

Net cash used in investing activities

 

(115,860

)

(229,993

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Principal payments on capital lease obligations

 

(960

)

(639

)

Proceeds from issuance of common stock to employees

 

13,571

 

27,258

 

Excess tax benefit from share-based compensation

 

2,796

 

2,919

 

Net cash provided by financing activities

 

15,407

 

29,538

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(79,176

)

(43,354

)

Cash and cash equivalents at beginning of period

 

117,054

 

181,258

 

Cash and cash equivalents at end of period

 

$

37,878

 

$

137,904

 

 

10