Mellanox Technologies Announces Financial Results for Q3 2007



    Fifth Consecutive Quarter of Record Revenue and Record Operating and Net
Income

    SANTA CLARA, CALIF. & YOKNEAM, ISRAEL, October 24 /CNW/ - Mellanox(TM)
Technologies, Ltd. (NASDAQ:   MLNX)(TASE: MLNX), a leading supplier of
semiconductor-based, server and storage interconnect products, today announced
financial results for its third quarter of 2007, ended Sept. 30, 2007.

    In accordance with U.S. generally accepted accounting principles (GAAP),
the company recorded revenue in the third quarter of $22.7 million, up 15
percent from $19.8 million in the second quarter of 2007 and up 69 percent
from $13.4 million in the third quarter a year ago.

    Gross margins in the third quarter were 74.9 percent, compared with 75.1
percent in the second quarter of 2007 and 72.8 percent in the third quarter of
2006. GAAP net income in the third quarter was $7.0 million or $0.21 per
diluted share, compared with $5.6 million or $0.17 per diluted share in the
second quarter of 2007 and $2.8 million in the third quarter of 2006.

    On a non-GAAP basis, the company recorded third quarter net income of
$8.0 million compared with $6.4 million in the second quarter of 2007 and $2.9
million in the third quarter a year ago. These non-GAAP net income results
exclude share-based compensation expenses.

    Total cash and investments were $148.2 million at Sept. 30, 2007. The
company generated $9.6 million of cash from operations during the quarter and
$21.3 million during the first nine months of 2007.

    "Our third quarter marked the fifth consecutive quarter of record
revenue, with net and operating income (both in dollars and as a percentage of
sales) at record highs," said Eyal Waldman, chairman, president and CEO. "Our
ConnectX InfiniBand adapters are enjoying wide adoption by our OEM customer
base, and are being integrated into large-cluster deployments, as well as in
volume-level servers, blade servers and storage devices, expanding our
addressable markets.

    "We are also seeing initial end-user deployments of our ConnectX 10
Gigabit Ethernet adapters for use in a variety of markets," he said.

    Recent Mellanox Press Release Highlights:

    -- Oct. 15 - IBRIX and Mellanox Offer the First InfiniBand-Attached
Scalable NAS Solution

    -- Oct. 9 - Mellanox 10 Gigabit Ethernet Products Demonstrate
Industry-Wide Interoperability at UNH IOL Summit

    -- Sept. 19 - Mellanox InfiniBand Drives Transaction Processing and
Storage Performance Benchmark on HP BladeSystem c-Class

    -- Sept. 18 - Mellanox ConnectX(TM) IB InfiniBand Adapters Accelerate IBM
BladeCenter(R) H

    -- Sept. 17 - Mellanox Delivers First PCI Express(R) 2.0 20Gb/s
InfiniBand and 10 Gigabit Ethernet Adapters

    -- Sept. 12 - Mellanox ConnectX(TM) IB InfiniBand Mezzanine Adapters and
Switches Accelerate the New HP BladeSystem c3000 Enclosure

    -- Sept. 11 - Mellanox and Verari Systems Demonstrate InfiniBand
Converged Wire Benefits in Server Blades with VMware

    -- Aug. 6 - Mellanox Announces Availability of Turnkey NFS-RDMA SDK for
InfiniBand that Delivers 10X Throughput Improvement

    Conference Calls

    Mellanox will broadcast its third quarter financial results conference
call today, Wednesday, Oct. 24, 2007 at 2:00 p.m. Pacific time (5 p.m. Eastern
time). To listen to the call, please dial (719) 325-4860 approximately 10
minutes prior to the start of the call. A taped replay will be made available
approximately one hour after the conclusion of the call, and will remain
available for one week. To access the replay, dial (719) 457-0820. The pass
code is 2648802.

    Mellanox will also conduct a conference call on Thursday, Oct. 25, 2007
at 9:00 a.m. Israel Standard Time (IST) to discuss the company's third fiscal
quarter financial results in Hebrew. To listen to the call, dial
+972-3-9180609 approximately 10 minutes prior to the start of the call. A
taped replay will be made available approximately two hours after the
conclusion of the call, and will remain available for twenty-four hours. To
access the replay, dial +972-3-9255940.

    Both conference calls will be available via a live webcast on the
investor relations section of the Mellanox web site at www.mellanox.com.
Access the web site 15 minutes prior to the start of the call to download and
install any necessary audio software. An archived webcast replay will be
available on the web site for 30 days.

    About Mellanox

    Mellanox Technologies is a leading supplier of semiconductor-based,
high-performance, InfiniBand and Ethernet connectivity products that
facilitate data transmission between servers, communications infrastructure
equipment and storage systems. The company's products are an integral part of
a total solution focused on computing, storage and communication applications
used in enterprise data centers, high-performance computing and embedded
systems.

    Founded in 1999, Mellanox Technologies is headquartered in Santa Clara,
California and Yokneam, Israel. For more information, visit Mellanox at
www.mellanox.com.

    GAAP to Non-GAAP Reconciliation

    To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP), Mellanox uses
non-GAAP measures of net income which are adjusted from results based on GAAP
to exclude share-based compensation expenses. The company believes the
non-GAAP results provide useful information to both management and investors,
as these non-GAAP results exclude expenses that are not indicative of our core
operating results. Management believes it is useful to exclude share-based
compensation expenses because it enhances investors' ability to review our
business from the same perspective as management, which believes that
share-based compensation expenses are not directly attributable to the
underlying performance of the company's business operations. Further,
management uses non-GAAP information as certain non-cash charges such as
share-based compensation do not reflect the cash operating results of the
business. These measures should be considered in addition to results prepared
in accordance with GAAP, but should not be considered a substitute for or
superior to GAAP results. These non-GAAP measures may be different than the
non-GAAP measures used by other companies. A reconciliation of GAAP to
non-GAAP condensed consolidated statements of operations is also presented in
the financial statements portion of this release and is posted under the
"Investors" section at our web site.

    Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995:

    All statements included or incorporated by reference in this release,
other than statements or characterizations of historical fact, are
forward-looking statements. These forward-looking statements are based on our
current expectations, estimates and projections about our industry and
business, management's beliefs, and certain assumptions made by us, all of
which are subject to change. Forward-looking statements can often be
identified by words such as "anticipates," "expects," "intends," "plans,"
"predicts," "believes," "seeks," "estimates," "may," "will," "should,"
"would," "could," "potential," "continue," "ongoing," similar expressions, and
variations or negatives of these words. These forward-looking statements are
not guarantees of future results and are subject to risks, uncertainties and
assumptions that could cause our actual results to differ materially and
adversely from those expressed in any forward-looking statement. The risks and
uncertainties that could cause our results to differ materially from those
expressed or implied by such forward-looking statements include the continued
rate of adoption of our ConnectX InfiniBand adapter products by our customers,
the integration of our ConnectX InfiniBand adapter products into large-cluster
deployments, volume-level servers, blade servers and storage devices, the rate
at which our OEM customer base expands; whether the number of enterprise and
commercial applications for our products will continue to increase; whether,
and if, we can ship to additional tier-one server companies later this year;
our ability to react to trends and challenges in our business and the markets
in which we operate; our ability to anticipate market needs or develop new or
enhanced products to meet those needs; the adoption rate of our products; our
ability to establish and maintain successful relationships with our
distribution partners; our ability to compete in our industry; fluctuations in
demand, sales cycles and prices for our products and services; our ability to
protect our intellectual property rights; general political, economic and
market conditions and events; and other risks and uncertainties described more
fully in our documents filed with or furnished to the Securities and Exchange
Commission. More information about the risks, uncertainties and assumptions
that may impact our business is set forth in our Form 10-K and in our most
recent Form 10-Q filed with the SEC on Aug. 8, 2007. All forward-looking
statements in this press release are based on information available to us as
of the date hereof, and we assume no obligation to update these
forward-looking statements.

    Mellanox, ConnectX, InfiniBlast, InfiniBridge, InfiniHost, InfiniRISC,
InfiniScale, and InfiniPCI are registered trademarks of Mellanox Technologies.
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,
                                   ------------------- -------------------
                                     2007      2006      2007      2006
                                   --------- --------- --------- ---------
                                    (In thousands, except per share data)

    Revenues                       $ 22,664  $ 13,422  $ 59,298  $ 32,741
    Cost of revenues                 (5,695)   (3,651)  (14,891)   (9,601)
                                   --------- --------- --------- ---------
    Gross profit                     16,969     9,771    44,407    23,140
                                   --------- --------- --------- ---------
    Operating expenses:
      Research and development        6,067     3,821    17,603    11,064
      Sales and marketing             3,294     2,122     9,089     6,080
      General and administrative      1,607       926     4,467     2,544
                                   --------- --------- --------- ---------
        Total operating expenses     10,968     6,869    31,159    19,688
                                   --------- --------- --------- ---------
    Income from operations            6,001     2,902    13,248     3,452
     Other income, net                1,432       101     4,169       232
                                   --------- --------- --------- ---------
    Income before taxes on income     7,433     3,003    17,417     3,684
     Provision for taxes on income     (461)     (148)   (1,554)     (271)
                                   --------- --------- --------- ---------
    Net income                     $  6,972  $  2,855  $ 15,863  $  3,413
                                   --------- --------- --------- ---------
      Accretion of Series D
       mandatorily redeemable
       convertible preferred
       shares                             -       (44)        -      (132)
    Net income allocable to
     preferred shareholders               -    (2,811)        -    (3,281)
                                   --------- --------- --------- ---------
      Net income attributable to
       ordinary shareholders       $  6,972  $   0.00  $ 15,863  $   0.00
                                   --------- --------- --------- ---------
    Net income per share
     attributable to ordinary
     shareholders -- basic         $   0.23  $   0.00  $   0.59  $   0.00
                                   --------- --------- --------- ---------
    Net income per share
     attributable to ordinary
     shareholders -- diluted       $   0.21  $   0.00  $   0.54  $   0.00
                                   --------- --------- --------- ---------
    Shares used in computing
     income per share attributable
     to ordinary shareholders:
      Basic                          30,146     7,697    26,806     7,673
      Diluted                        32,575     9,752    29,264     9,623
    

    
                         Mellanox Technologies, Ltd.
             Reconciliation of GAAP to Non-GAAP Operating Results
                          (in thousands, unaudited)

                                   Three months ended   Nine months ended
                                      September 30,       September 30,
                                   ------------------- -------------------
                                     2007      2006      2007      2006
                                   --------- --------- --------- ---------

    GAAP NET INCOME                $  6,972  $  2,855  $ 15,863  $  3,413
    Adjustments:
      Share-based compensation
       expense                          995        62     2,420       172
                                   --------- --------- --------- ---------
    NON-GAAP NET INCOME            $  7,967  $  2,917  $ 18,283  $  3,585
                                   --------- --------- --------- ---------

    GAAP SHARES - BASIC              30,146     7,697    26,806     7,673
    Adjustments:
      Impact from weighted
       outstanding shares(1)            386        32     3,726        56
                                   --------- --------- --------- ---------
    NON-GAAP SHARE - BASIC           30,532     7,729    30,532     7,729
                                   --------- --------- --------- ---------

    GAAP SHARES - DILUTED            32,575     9,752    29,264     9,623
    Adjustments:
      Impact from weighted
       outstanding shares(1)            386        32     3,726        56
      Effect of dilutive
       securities under GAAP(2)      (2,429)   (2,055)   (2,458)   (1,950)
      Total options vested and
       exercisable                    3,253     3,400     3,253     3,400
                                   --------- --------- --------- ---------
    NON-GAAP SHARES - DILUTED        33,785    11,129    33,785    11,129
                                   --------- --------- --------- ---------

    (1) Under GAAP, shares used in computing income per share attributable
     to ordinary shareholders are adjusted for the amount of time they are
     outstanding during the period. Because the shares issued pursuant to
     our initial public offering were issued, and all of our then
     outstanding preferred shares converted into ordinary shares on
     February 13, 2007, those shares were adjusted for the amount of time
     they were outstanding during the period as part of the GAAP SHARES -
     BASIC calculation. The GAAP SHARES - BASIC have been adjusted to a
     non-GAAP measure as if those ordinary shares were outstanding during
     the entire period to provide a comparable share number in future
     quarters.

    (2) This adjustment adds back the GAAP effect of additional ordinary
     shares that would have been outstanding if the dilutive potential
     common shares from stock options had been issued under the Treasure
     method.
    

    
                         Mellanox Technologies, Ltd.
                    Condensed Consolidated Balance Sheets
                                (in thousands)

                                                September 30, December 31,
                                                ------------- ------------
                                                    2007          2006
                                                ------------- ------------
                                                      (In thousands)
                                                 (unaudited)   (audited)
                                    ASSETS
    Current assets:
      Cash and cash equivalents                 $     54,084  $    20,570
      Marketable securities                           93,497            -
      Restricted cash                                    630          678
      Accounts receivable, net                        13,700       10,141
      Inventories                                      5,382        4,079
      Prepaid expenses and other                       1,138        2,470
                                                ------------- ------------
        Total current assets                         168,431       37,938
      Property and equipment, net                      6,987        2,588
      Severance assets                                 2,914        2,284
      Intangible assets, net                             411          167
      Other long-term assets                             122          124
                                                ------------- ------------
        Total assets                            $    178,865  $    43,101
                                                ------------- ------------

     LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY
                                   (DEFICIT)
    Current liabilities:
      Accounts payable                          $      6,314  $     4,490
      Other accrued liabilities                       11,480        6,426
      Capital lease obligations, current               2,088          420
      Other liabilities, current                           -        1,156
                                                ------------- ------------
        Total current liabilities                     19,882       12,492
      Accrued severance                                3,781        2,940
      Capital lease obligations, net of current
       portion                                         1,479          541
      Other long-term obligations                         77           96
                                                ------------- ------------
        Total liabilities                             25,219       16,069

    Commitments and contingencies
    Mandatorily redeemable convertible
     preferred shares                                      -       55,759
    Convertible preferred shares                           -       36,338

    Shareholders' equity (deficit)
      Ordinary shares                                    126           32
      Additional paid-in capital                     206,905        4,174
      Accumulated other comprehensive income              23            -
      Accumulated deficit                            (53,408)     (69,271)
                                                ------------- ------------
        Total shareholders' equity (deficit)         153,646      (65,065)
                                                ------------- ------------
          Total liabilities, convertible
           preferred shares and shareholders'
           equity (deficit)                     $    178,865  $    43,101
                                                ------------- ------------
    

    
                         Mellanox Technologies, Ltd.
                Condensed Consolidated Statement of Cash Flows
                          (in thousands, unaudited)

                                                        Nine Months Ended
                                                          September 30,
                                                       -------------------
                                                         2007      2006
                                                       --------- ---------
                                                        (In thousands of
                                                             dollars)
    Cash flows from operating activities:
      Net income                                       $ 15,863  $  3,413
      Adjustments to reconcile net income to net cash
       provided by operating activities:
         Depreciation and amortization                    1,431     1,401
         Share-based compensation expense                 2,420       172
         Accrued interest on restricted cash             (1,453)      (42)
         Changes in assets and liabilities:
           Accounts receivable, net                      (3,559)   (1,777)
           Inventories                                   (1,303)      886
           Prepaid expenses and other assets              1,334      (905)
           Accounts payable                               1,824       846
           Accrued liabilities and other payables         4,760       315
                                                       --------- ---------
             Net cash provided by operating activities   21,317     4,309
                                                       --------- ---------
    Cash flows from investing activities:
      Purchase of severance-related insurance policies     (630)     (395)
      Purchases of marketable securities                (99,580)        -
      Maturities and sale of marketable securities        7,536         -
      Return of restricted cash deposit                      71        50
      Purchase of property and equipment                 (2,270)     (606)
                                                       --------- ---------
             Net cash used in investing activities      (94,873)     (951)
                                                       --------- ---------
    Cash flows from financing activities:
      Proceeds from initial public offering, net of
       issuance costs                                   105,955         -
      Principal payments on capital lease obligations    (1,233)     (203)
      Payments on deferred public offering costs              -      (144)
      Proceeds from exercise of share options             2,348       439
                                                       --------- ---------
             Net cash provided by financing activities  107,070        92
                                                       --------- ---------
    Net increase in cash and cash equivalents            33,514     3,450
    Cash and cash equivalents at beginning of period     20,570    12,350
                                                       --------- ---------
    Cash and cash equivalents at end of period         $ 54,084  $ 15,800
                                                       --------- ---------
    




For further information:

For further information: Mellanox Technologies Brian Sparks,
408-970-3400 ir@mellanox.com or Stapleton Communications Inc. Deborah
Stapleton, 650-470-0200 deb@stapleton.com or Gelbart Kahana Nava Ladin,
+972-3-6074717 nava@gk-biz.com

Organization Profile

MELLANOX TECHNOLOGIES, LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890