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Mellanox Technologies, Ltd. Announces Fourth Quarter And Fiscal Year 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 Twelve Months Ended
December 31, December 31,
2013   2012 2013   2012
 
Total revenues $ 105,544 $ 122,118 $ 390,859 $ 500,799
Cost of revenues   37,096     38,973     135,239     157,936  
Gross profit 68,448 83,145 255,620 342,863
Operating expenses:
Research and development 47,518 36,101 168,721 138,946
Sales and marketing 19,036 16,002 70,318 61,068
General and administrative   9,786     7,136     36,918     24,541  
Total operating expenses 76,340 59,239 275,957 224,555
Income (loss) from operations (7,892 ) 23,906 (20,337 ) 118,308
Other income, net   301     269     1,228     1,259  
Income (loss) before taxes (7,591 ) 24,175 (19,109 ) 119,567
(Provision) benefit for taxes on income   340     (5,733 )   (3,752 )   (8,187 )
Net income (loss) $ (7,251 ) $ 18,442   $ (22,861 ) $ 111,380  
Net income (loss) per share — basic $ (0.17 ) $ 0.43   $ (0.53 ) $ 2.70  
Net income (loss) per share — diluted $ (0.17 ) $ 0.41   $ (0.53 ) $ 2.54  
Shares used in computing income (loss) per share:

Basic

43,907 42,451 43,421 41,308
Diluted 43,907 44,614 43,421 43,901
 

Mellanox Technologies, Ltd.

Reconciliation of Non-GAAP Adjustments

(in thousands, percentages, unaudited)

 
  Three Months Ended   Twelve Months Ended
December 31, December 31,
2013     2012 2013   2012
 

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

GAAP net income (loss) $ (7,251 ) $ 18,442 $ (22,861 ) $ 111,380
Adjustments:
Share-based compensation expense:
Cost of revenues 469 445 1,828 1,621
Research and development 6,808 5,773 25,956 19,356
Sales and marketing 2,325 1,876 9,198 8,055
General and administrative   2,064     1,869     8,156     5,987  
Total share-based compensation expense 11,666 9,963 45,138 35,019
Amortization expense of acquired intangibles:
Cost of revenues 3,194 1,849 10,424 7,520
Research and development 168 507
Sales and marketing   1,039     440     2,951     1,757  
Total amortization expense of acquired intangibles 4,401 2,289 13,882 9,277
Acquisition related charges:
Cost of revenues 208 907
Research and development 219 552
Sales and marketing 219 480
General and administrative   274         2,774      
Total acquisition related charges   920         4,713      
Non-GAAP net income $ 9,736   $ 30,694   $ 40,872   $ 155,676  
 
 

Reconciliation of GAAP gross profit to non-GAAP:

Revenues $ 105,544 $ 122,118 $ 390,859 $ 500,799
GAAP gross profit 68,448 83,145 255,620 342,863
GAAP gross margin 64.9 % 68.1 % 65.4 % 68.5 %
Share-based compensation expense 469 445 1,828 1,621
Amortization expense of acquired intangibles 3,194 1,849 10,424 7,520
Acquisition related charges   208         907      
Non-GAAP gross profit $ 72,319   $ 85,439   $ 268,779   $ 352,004  
Non-GAAP gross margin 68.5 % 70.0 % 68.8 % 70.3 %
 
 

Reconciliation of GAAP operating expenses to non-GAAP:

GAAP operating expenses $ 76,340 $ 59,239 $ 275,957 $ 224,555
Share-based compensation expense (11,197 ) (9,518 ) (43,310 ) (33,398 )
Amortization expense of acquired intangibles (1,207 ) (440 ) (3,458 ) (1,757 )
Acquisition related charges   (712 )       (3,806 )    
Non-GAAP operating expenses $ 63,224   $ 49,281   $ 225,383   $ 189,400  
 
 

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

GAAP income (loss) from operations $ (7,892 ) $ 23,906 $ (20,337 ) $ 118,308
Share-based compensation expense 11,666 9,963 45,138 35,019
Amortization expense of acquired intangibles 4,401 2,289 13,882 9,277
Acquisition related charges   920         4,713      
Non-GAAP income from operations $ 9,095   $ 36,158   $ 43,396   $ 162,604  
 

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,
2013   2012 2013   2012
 
Shares used in computing GAAP diluted earnings per share 43,907 44,614 43,421 43,901
Adjustments:
Effect of dilutive securities under GAAP* (2,163 ) (2,593 )
Total options vested and exercisable   1,913     1,888     1,913     1,888  
Shares used in computing non-GAAP diluted earnings per share   45,820     44,339     45,334     43,196  
 
GAAP diluted net income (loss) per share $ (0.17 ) $ 0.41 $ (0.53 ) $ 2.54
Adjustments:
Share-based compensation expense 0.27 0.22 1.04 0.79
Amortization expense of acquired intangibles 0.10 0.05 0.32 0.21
Acquisition related charges 0.02 0.00 0.11 0.00
Effect of dilutive securities under GAAP* 0.00 0.04 0.00 0.22
Total options vested and exercisable   (0.01 )   (0.03 )   (0.04 )   (0.16 )
Non-GAAP diluted income per share $ 0.21   $ 0.69   $ 0.90   $ 3.60  
 

*  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)

   
December 31, December 31,
2013 2012
ASSETS
Current assets:
Cash and cash equivalents $ 63,164 $ 117,054
Short-term investments 263,528 302,593
Restricted cash 3,229
Accounts receivable, net 70,566 58,516
Inventories 35,963 43,318
Deferred taxes and other current assets   17,581   15,616
Total current assets 450,802 540,326
Property and equipment, net 70,815 62,375
Severance assets 10,630 8,907
Intangible assets, net 54,362 16,134
Goodwill 199,558 132,885
Deferred taxes and other long-term assets   20,613   10,419
Total assets $ 806,780 $ 771,046
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 29,964 $ 37,431
Accrued liabilities 52,588 57,879
Deferred revenue 15,849 12,018
Capital lease liabilities, current   1,245   1,253
Total current liabilities 99,646 108,581
Accrued severance 13,418 11,821
Deferred revenue 9,045 8,366
Capital lease liabilities 1,600 2,835
Other long-term liabilities   17,091   11,635
Total liabilities 140,800 143,238
Shareholders’ equity:
Ordinary shares 185 178
Additional paid-in capital 550,795 488,365
Accumulated other comprehensive income 1,390 2,794
Retained earnings   113,610   136,471
Total shareholders’ equity   665,980   627,808
Total liabilities and shareholders’ equity $ 806,780 $ 771,046
 

Mellanox Technologies, Ltd.

Condensed Consolidated Statement of Cash Flows

(in thousands, unaudited)

 
  Twelve Months Ended December 31,
2013   2012
Cash flows from operating activities:
Net income (loss) $ (22,861 ) $ 111,380
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 35,886 23,868
Deferred income taxes (1,240 ) (3,454 )
Share-based compensation 45,138 35,019
Gain on investments (1,219 ) (896 )
Excess tax benefit from share-based compensation (2,662 ) (5,141 )
Changes in assets and liabilities:
Accounts receivable, net (8,870 ) (10,301 )
Inventories 9,264 (19,436 )
Prepaid expenses and other assets 1,414 (3,239 )
Accounts payable (4,447 ) 3,430
Accrued liabilities and other payables   1,599     51,259  
Net cash provided by operating activities   52,002     182,489  
 
Cash flows from investing activities:
Acquisition of Kotura, 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 (849 ) (783 )
Purchases of short-term investments (200,377 ) (328,998 )
Proceeds from sale of short-term investments 122,997 14,860
Proceeds from maturities of short-term investments 117,806 64,683
Decrease in restricted cash deposits 3,468 1,327
Purchase of property and equipment (30,911 ) (30,544 )
Purchase of intangibles (7,440 )
Purchase of equity investment in a private companies   (3,123 )   (1,424 )
Net cash used in investing activities   (121,948 )   (280,879 )
 
Cash flows from financing activities:
Principal payments on capital lease obligations (1,243 ) (918 )
Proceeds from issuance of ordinary shares to employees 14,637 29,963
Excess tax benefit from share-based compensation   2,662     5,141  
Net cash provided by financing activities   16,056     34,186  
 
Net decrease in cash and cash equivalents (53,890 ) (64,204 )
Cash and cash equivalents at beginning of period   117,054     181,258  
Cash and cash equivalents at end of period $ 63,164   $ 117,054  




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