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Mellanox Technologies, Ltd. Announces Third Quarter 2013 Financial Results

Stocks in this article: MLNX

Mellanox is a registered trademark 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 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
 

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
 

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.

 

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
 

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  




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