Mellanox: Fiscal 4Q15 Financial Results

Highlights:

• Annual revenue growth of 41.9% to $658 million
• Annual Non-GAAP net income grew 2.4X to $138 million
• Record annual revenues in IB and Ethernet products

Mellanox Technologies, Ltd. announced financial results for its fourth quarter and fiscal year ended December 31, 2015.

“We are pleased to achieve record quarterly and annual revenues. Our profitability grew 2.4 times year-over-year with operating income representing 21.3% of revenues. We are proud to grow our annual net income to $138.5 million and generate $150.5 million in cash from operations in 2015 – while we continued to invest in our technology and businesses,” said Eyal Waldman, president and CEO of Mellanox Technologies. “We saw strong growth in our Ethernet business in 2015, and expect it to accelerate in 2016 and beyond. We are pleased to see our IB business continue to grow across multiple markets and technology generations, with strong adoption of our EDR 100Gb IB products. We look forward to closing the EZChip merger in the second half of February 2016. This merger is important to Mellanox and adds processing capabilities to our networking technologies. We believe the combination of these technologies will lead to a superior position in the data center interconnect market. We expect this transaction to be accretive from day one.”

Fourth Quarter and 2015 Fiscal Year Highlights

• Revenues were $176.9 million in the fourth quarter, and $658.1 million in fiscal year 2015.
• GAAP gross margins were 70.7% in the fourth quarter, and 71.3% in fiscal year 2015.
• Non-GAAP gross margins were 72.2% in the fourth quarter, and 72.8% in fiscal year 2015.
• GAAP operating income was $19.9 million, or 11.3% of revenue, in the fourth quarter, and operating income was $75.1 million, or 11.4% of revenue, in fiscal year 2015.
• Non-GAAP operating income was $36.6 million, or 20.7% of revenue, in the fourth quarter, and $139.9 million, or 21.3% of revenue, in fiscal year 2015.
• GAAP net income was $43.2 million in the fourth quarter and $92.9 million in fiscal year 2015 which included an income tax benefit from the release of a valuation allowance of $22.4 million in the fourth quarter.
• Non-GAAP net income was $37.5 million in the fourth quarter, and $138.5 million in fiscal year 2015.
• GAAP net income per diluted share was $0.90 in the fourth quarter, and $1.94 in fiscal year 2015.
• Non-GAAP net income per diluted share was $0.77 in the fourth quarter, and was $2.89 in fiscal year 2015.
• $34.7 million in cash was provided by operating activities during the fourth quarter.
• $150.5 million in cash was provided by operating activities during fiscal year 2015.
• Cash and investments totaled $510.5 million at December 31, 2015.

First Quarter 2016 Guidance

• Quarterly revenues of $180 million to $185 million
• Non-GAAP gross margins of 71% to 72%
• Increase in non-GAAP operating expenses of 2% to 4%
• Share-based compensation expense of $12.4 million to $12.9 million
• Non-GAAP diluted share count of 48.7 million to 49.2 million shares

Upon closing the EZchip transaction, Mellanox will provide updated guidance for the combined entity.