Mellanox Announces Fourth Quarter and Fiscal Year 2014 Financial Results - HPC ASIA
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Mellanox Announces Fourth Quarter and Fiscal Year 2014 Financial Results

Counting on success

Mellanox Technologies, Ltd., a leading supplier of end-to-end interconnect solutions for servers and storage systems, today announced financial results for its fourth quarter and fiscal year 2014.

Fourth Quarter and Fiscal Year Highlights

  • Revenues were $141.1 million in the fourth quarter, and $463.6 million in fiscal year 2014.
  • GAAP gross margins were 70.9 percent in the fourth quarter, and 67.9 percent in fiscal year 2014.
  • Non-GAAP gross margins were 72.3 percent in the fourth quarter, and 70.4 percent in fiscal year 2014.
  • GAAP operating income was $13.6 million, or 9.6 percent of revenue, in the fourth quarter, and operating loss was $7.2 million, or (1.6) percent of revenue, in fiscal year 2014.
  • Non-GAAP operating income was $29.1 million, or 20.6 percent of revenue, in the fourth quarter, and $57.8 million, or 12.5 percent of revenue, in fiscal year 2014.
  • GAAP net loss was $4.8 million in the fourth quarter and $24.0 million in fiscal year 2014 which included a deferred tax valuation allowance expense of $17.2 million in the fourth quarter.
  • Non-GAAP net income was $28.0 million in the fourth quarter, and $58.2 million in fiscal year 2014.
  • GAAP net loss per diluted share was $0.10 in the fourth quarter, and $0.54 in fiscal year 2014.
  • Non-GAAP net income per diluted share was $0.59 in the fourth quarter, and was $1.25 in fiscal year 2014.
  • $45.0 million in cash was provided by operating activities during the fourth quarter.
  • $80.1 million in cash was provided by operating activities during fiscal year 2014.
  • Cash and investments totaled $389.0 million at December 31, 2014.

Mellanox also announced that its ConnectX-4 adapter is up and running in its labs at 10, 25, 40, 50, and 100 Gigabit per second Ethernet speeds. In addition, the Company announced that its end-to-end 100 Gigabit InfiniBand solution is accelerating high-performance computing applications in a cluster environment. These solutions are expected to ship in the first quarter of 2015.

Financial Results

In accordance with U.S. generally accepted accounting principles (GAAP), the company reported revenue of $141.1 million for the fourth quarter, up 16.9 percent from $120.7 million in the third quarter of 2014, and up 33.7 percent from $105.6 million in the fourth quarter of 2013. For the year ended December 31, 2014, revenue was $463.6 million, an increase of 18.8 percent from revenue of $390.4 million reported in 2013.

GAAP gross margins in the fourth quarter of 2014 were 70.9 percent, compared with 67.4 percent in the third quarter of 2014 and 65.3 percent in the fourth quarter of 2013. GAAP gross margins in 2014 were 67.9 percent, compared with 65.6 percent in 2013.

Non-GAAP gross margins in the fourth quarter of 2014 were 72.3 percent, compared with 70.4 percent in the third quarter of 2014 and 69.0 percent in the fourth quarter of 2013. Non-GAAP gross margins in 2014 were 70.4 percent, compared with 69.0 percent in 2013.

GAAP net loss in the fourth quarter of 2014 was $4.8 million, or $0.10 per diluted share, compared with GAAP net income of $0.6 million, or$0.01 per diluted share in the third quarter of 2014 and net loss of $7.3 million or $0.17 per diluted share in the fourth quarter of 2013.

Non-GAAP net income in the fourth quarter of 2014 was $28.0 million, or $0.59 per diluted share, compared with $18.2 million, or $0.39 per diluted share in the third quarter of 2014, and $9.7 million, or $0.21 per diluted share in the fourth quarter of 2013. The fourth quarter 2014 non-GAAP net income excludes $11.8 million of share-based compensation expense compared to $11.8 million in the third quarter of 2014, and $11.7 million in the fourth quarter of 2013. Fourth quarter 2014 non-GAAP net income also excludes the 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, compared to amortization expenses of acquired intangible assets of $2.9 million, $1.7 million of acquisition-related charges and settlement costs of $1.3 million in the third quarter of 2014, and compared to amortization expenses of acquired intangible assets of $4.5 million, and $0.9 million of acquisition related charges for the fourth quarter of 2013. The Company records a valuation allowance on deferred tax assets when all available evidence indicates that deferred tax assets will likely not be realized.

GAAP net loss in 2014 was $24.0 million, or $0.54 per diluted share, compared to $23.3 million of GAAP net loss, or $0.54 per diluted share in 2013.

Non-GAAP net income in 2014 was $58.2 million, or $1.25 per diluted share, compared to $40.5 million or $0.89 per diluted share in 2013. 2014 non-GAAP net income excludes $47.2 million of share-based compensation expense, $12.1 million of amortization expense of acquired intangible assets, $4.4 million of acquisition related charges, settlement costs of $1.3 million and a charge related to recognition of deferred tax valuation allowance of $17.2 million. 2013 non-GAAP net income excludes $45.1 million of share-based compensation expense, $14.0 millionof amortization expense of acquired intangible assets and $4.7 million of acquisition related charges.

Total cash and investments at December 31, 2014 were $389.0 million compared to $330.2 million at December 31, 2013. The company generated $45.0 million in cash from operating activities in the fourth quarter of 2014, and $80.1 million for fiscal year 2014.

“We are pleased with the results of the quarter. They were achieved by the adoption of 40 Gigabit Ethernet by some of our leading customers, the growth in high-performance computing deployments with our increased market share and additional penetration into Web 2.0, storage and cloud markets,” said Eyal Waldman, president and CEO of Mellanox Technologies. “The need for faster interconnects continues to grow as data increases exponentially. We are very excited to see our 100 Gigabit per second InfiniBand interconnect solution go to market and expect to be utilized by multiple applications starting in the first quarter of 2015. In addition, we are also excited to see our 25, 50 and 100 Gigabit Ethernet NICs and cables up and running, and expect to ship these products this quarter as well. As the only provider of full end-to-end standard InfiniBand and Ethernet interconnect solutions and the first company with a full end-to-end EDR 100 Gigabit solution, we believe we are the only vendor who can help our customers handle the demands that this data growth creates.”

Recent Mellanox Press Release Highlights

  • Jan. 6, 2015 – EMGS Selects Mellanox 40 Gigabit Ethernet Switches and NICs
  • Nov. 19, 2014 – Mellanox Introduces Programmable Network Adapter Product Line with Application Acceleration Engine
  • Nov. 18, 2014 – Mellanox Delivers the World’s Fastest EDR 100Gb/s InfiniBand Switch with Latency Less than 90 Nanoseconds
  • Nov. 18, 2014 – Minnesota Supercomputing Institute Selects Mellanox EDR 100Gb/s InfiniBand for Large-Scale Supercomputer
  • Nov. 17, 2014 – Mellanox Announces Availability of 100Gb/s Direct Attach Copper and Active Optical Cables
  • Nov. 14, 2014 – Mellanox EDR 100Gb/s InfiniBand Solutions Chosen for Leading Supercomputer Project (“CORAL”)
  • Nov. 12, 2014 – Mellanox Enables End-to-End 100Gb/s Interconnect Solution with Introduction of ConnectX-4 Adapter
  • Nov. 4, 2014 – Toshiba Selects Mellanox 40 Gigabit Ethernet NICs for Storage Platforms
  • Oct. 30, 2014 – Mellanox 10 and 40 Gigabit Ethernet NICs to Support Microsoft Open CloudServer (OCS) Specification “version 2″
  • Oct. 30, 2014 – Mellanox Introduces New 40 Gigabit Ethernet NICs Supporting the Open Compute Project 2.0 Specification

First Quarter 2015 Guidance

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

  • Quarterly revenues of $140 million to $145 million
  • Non-GAAP gross margins of 70 percent to 71 percent
  • An increase in non-GAAP operating expenses of 5 percent to 7 percent
  • Share-based compensation expense of $12.0 million to $12.5 million
  • Non-GAAP diluted share count of 47.3 million to 47.8 million shares

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.

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