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Mellanox Technologies, Ltd. Announces Fourth Quarter 2012 And Record Fiscal Year Financial Results

Stocks in this article: MLNX

Mellanox, BridgeX, ConnectX, CORE-Direct, InfiniBridge, InfiniHost, InfiniScale, PhyX, SwitchX, Virtual Protocol Interconnect and Voltaire are registered trademarks of Mellanox Technologies, Ltd. Connect-IB, FabricIT, MLNX-OS, ScalableHPC, Unbreakable-Link, UFM and Unified Fabric Manager are trademarks 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 Twelve Months Ended
December 31, December 31,
2012     2011 2012     2011
 
Total revenues $ 122,118 $ 72,689 $ 500,799 $ 259,251
Cost of revenues   38,973     26,186     157,936     92,015  
Gross profit 83,145 46,503 342,863 167,236
Operating expenses:
Research and development 36,101 25,142 138,946 92,508
Sales and marketing 16,002 11,338 61,068 40,366
General and administrative   7,136     4,140     24,541     21,769  
Total operating expenses 59,239 40,620 224,555 154,643
Income from operations 23,906 5,883 118,308 12,593
Other income, net   269     207     1,259     759  
Income before taxes 24,175 6,090 119,567 13,352
Provision for taxes on income   (5,733 )   (1,427 )   (8,187 )   (3,375 )
Net income $ 18,442   $ 4,663   $ 111,380   $ 9,977  
Net income per share — basic $ 0.43   $ 0.12   $ 2.70   $ 0.28  
Net income per share — diluted $ 0.41   $ 0.11   $ 2.54   $ 0.26  

Shares used in computing income per share:

Basic 42,451 39,542 41,308 36,263
Diluted 44,614 41,800 43,901 38,562
 
         
Mellanox Technologies, Ltd.
Reconciliation of Non-GAAP Adjustments
(in thousands, percentages, unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2012     2011 2012     2011
 

Reconciliation of GAAP net income to non-GAAP net income:

GAAP net income $ 18,442 $ 4,663 $ 111,380 $ 9,977
Adjustments:
Share-based compensation expense:
Cost of revenues 445 259 1,621 980
Research and development 5,773 3,491 19,356 11,906
Sales and marketing 1,876 1,322 8,055 4,894
General and administrative   1,869     987     5,987     3,632  
Total share-based compensation expense 9,963 6,059 35,019 21,412
Amortization of acquired intangibles:
Cost of revenue 1,849 1,923 7,520 8,246
Sales and marketing   440     438     1,757     1,569  
Total amortization of acquired intangibles 2,289 2,361 9,277 9,815
Other acquisition related charges               4,394  
Non-GAAP net income $ 30,694   $ 13,083   $ 155,676   $ 45,598  
 
 

Reconciliation of GAAP gross profit to non-GAAP:

Revenues $ 122,118 $ 72,689 $ 500,799 $ 259,251
GAAP gross profit 83,145 46,503 342,863 167,236
GAAP gross margin 68.1 % 64.0 % 68.5 % 64.5 %
Share-based compensation expense 445 259 1,621 980
Acquisition related charges   1,849     1,923     7,520     8,246  
Non-GAAP gross profit $ 85,439   $ 48,685   $ 352,004   $ 176,462  
Non-GAAP gross margin 70.0 % 67.0 % 70.3 % 68.1 %
 
 

Reconciliation of GAAP operating expenses to non-GAAP:

GAAP operating expenses $ 59,239 $ 40,620 $ 224,555 $ 154,643
Share-based compensation expense (9,518 ) (5,800 ) (33,398 ) (20,432 )
Acquisition related charges   (440 )   (438 )   (1,757 )   (5,963 )
Non-GAAP operating expenses $ 49,281   $ 34,382   $ 189,400   $ 128,248  
 
 

Reconciliation of GAAP income from operations to non-GAAP:

GAAP income from operations $ 23,906 $ 5,883 $ 118,308 $ 12,593
Share-based compensation expense 9,963 6,059 35,019 21,412
Acquisition related charges   2,289     2,361     9,277     14,209  
Non-GAAP income from operations $ 36,158   $ 14,303   $ 162,604   $ 48,214  
 
         
Mellanox Technologies, Ltd.
Reconciliation of Non-GAAP Adjustments
(in thousands, except per share data, unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2012     2011 2012     2011
 
 
Shares used in computing GAAP diluted earnings per share 44,614 41,800 43,901 38,562
Adjustments:
Effect of dilutive securities under GAAP* (2,163 ) (2,258 ) (2,593 ) (2,299 )
Total options vested and exercisable   1,888     3,037     1,888     3,037  
Shares used in computing non-GAAP diluted earnings per share**   44,339     42,579     43,196     39,300  
 
GAAP diluted net income per share $ 0.41 $ 0.11 $ 2.54 $ 0.26
Adjustments:
Share-based compensation expense 0.22 0.14 0.79 0.56
Amortization of acquired intangibles 0.05 0.06 0.21 0.25
Other acquisition related charges 0.00 0.00 0.00 0.11
Effect of dilutive securities under GAAP* 0.04 0.02 0.22 0.07
Total options vested and exercisable   (0.03 )   (0.02 )   (0.16 )   (0.09 )
Non-GAAP diluted income per share** $ 0.69   $ 0.31   $ 3.60   $ 1.16  

*  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.

**  Effective January 1, 2012, the Company uses weighted shares outstanding method to calculate the non-GAAP share count. For comparison purposes, the non-GAAP share count for the 2011 periods presented was calculated using this new method.

         
Mellanox Technologies, Ltd.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
December 31, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 117,054 $ 181,258
Short-term investments 302,593 52,373
Restricted cash 3,229 4,452
Accounts receivable, net 58,516 48,215
Inventories 43,318 24,955
Deferred taxes and other current assets   15,616   7,373  
Total current assets 540,326 318,626
Property and equipment, net 62,375 36,806
Severance assets 8,907 7,767
Intangible assets, net 16,134 25,657
Goodwill 132,885 132,885
Deferred taxes and other long-term assets   10,419   8,289  
Total assets $ 771,046 $ 530,030  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 37,431 $ 30,132
Accrued liabilities 57,879 31,091
Deferred revenue 12,018 5,571
Capital lease obligations   1,253   299  
Total current liabilities 108,581 67,093
Accrued severance 11,821 10,433
Deferred revenue 8,366 3,664
Capital lease obligations 2,835 279
Other long-term liabilities   11,635   6,214  
Total liabilities 143,238 87,683
Shareholders’ equity:
Ordinary shares 178 165
Additional paid-in capital 488,365 418,255
Accumulated other comprehensive income (loss) 2,794 (1,164 )
Retained earnings   136,471   25,091  
Total shareholders’ equity   627,808   442,347  
Total liabilities and shareholders’ equity $ 771,046 $ 530,030  
 
     
Mellanox Technologies, Ltd.
Condensed Consolidated Statement of Cash Flows
(in thousands, unaudited)
 
Twelve Months Ended December 31,
2012     2011
Cash flows from operating activities:
Net income $ 111,380 $ 9,977
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23,868 19,745
Deferred income taxes (3,454 ) (228 )
Share-based compensation 35,019 21,412
Gain on investments (896 ) (15 )
Excess tax benefit from share-based compensation (5,141 ) (2,411 )
Changes in assets and liabilities:
Accounts receivable, net (10,301 ) (15,899 )
Inventories (19,436 ) (8,639 )
Prepaid expenses and other assets (3,239 ) (513 )
Accounts payable 3,430 19,102
Accrued liabilities and other payables   51,259     18,645  
Net cash provided by operating activities   182,489     61,176  
 
Cash flows from investing activities:
Acquisition of Voltaire Ltd., net of cash acquired of $3,961 (203,704 )
Purchase of severance-related insurance policies (783 ) (832 )
Purchases of short-term investments (328,998 ) (45,600 )
Proceeds from sale of short-term investments 14,860 149,889
Proceeds from maturities of short-term investments 64,683 12,128
Decrease (increase) in restricted cash deposits 1,327 (1,700 )
Purchase of property and equipment (30,544 ) (22,717 )
Purchase of equity investment in a private company   (1,424 )    
Net cash used in investing activities   (280,879 )   (112,536 )
 
Cash flows from financing activities:
Proceeds from public offering, net 104,201
Principal payments on capital lease obligations (918 ) (459 )
Proceeds from issuance of ordinary shares to employees 29,963 18,471
Excess tax benefit from share-based compensation   5,141     2,411  
Net cash provided by financing activities   34,186     124,624  
 
Net (decrease) increase in cash and cash equivalents (64,204 ) 73,264
Cash and cash equivalents at beginning of period   181,258     107,994  
Cash and cash equivalents at end of period $ 117,054   $ 181,258  
 




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