ACADEMIA

67.6 Percent Year-over-Year Revenue Growth; Continued Market Penetration and Product Diversification in 2011;Increased Unit Volume 40 Percent Year-over-Year

Mellanox Technologies has announced record financial results in its fourth quarter and fiscal year 2011, ended Dec. 31, 2011.

Fourth Quarter and 2011 Fiscal Year Highlights

• Revenues were a record $72.7 million in the fourth quarter, and $259.3 million in 2011

• GAAP gross margins were 64.0 percent in the fourth quarter, and 64.5 percent in 2011

• Non-GAAP gross margins were 67.0 percent in the fourth quarter and 68.1 percent in 2011

• GAAP fourth quarter operating income was $5.9 million; GAAP fiscal year operating income was $12.6 million

• Non-GAAP fourth quarter operating income was a record $14.3 million, and $48.2 million in 2011

• GAAP fourth quarter net income was $4.7 million; GAAP fiscal year net income was $10.0 million

• Non-GAAP fourth quarter net income was a record $13.1 million and $45.6 million in 2011

• GAAP fourth quarter net income per diluted share was $0.11; GAAP fiscal year net income per diluted share was $0.26

• Non-GAAP fourth quarter net income per diluted share was $0.31; non-GAAP fiscal year net income per diluted share was a record $1.07

• A record $22.2 million in cash was provided by operating activities during the fourth quarter

• A record $63.1 million in cash was provided by operating activities during the year

• $238.1 million in total cash and investments at Dec. 31, 2011

Financial Results 
In accordance with U.S. generally accepted accounting principles (GAAP), the company reported record revenue of $72.7 million for the fourth quarter, up 6.6 percent from $68.2 million in the third quarter of 2011, and up 78.6 percent from $40.7 million in the fourth quarter of 2010.  For the year ended Dec. 31, 2011, revenue was a record $259.3 million, an increase of 67.6 percent from revenue of $154.6 million reported in 2010.  The 2010 comparable financials do not include any of Voltaire’s 2010 results.

GAAP gross margins in the fourth quarter of 2011 were 64.0 percent, compared with 64.5 percent in the third quarter of 2011 and 71.8 percent in the fourth quarter of 2010.  GAAP gross margins in 2011 were 64.5 percent, compared with 73.8 percent in 2010.

Non-GAAP gross margins in the fourth quarter of 2011 were 67.0 percent, compared with 68.2 percent in the third quarter of 2011 and 72.0 percent in the fourth quarter of 2010.  Non-GAAP gross margins in 2011 were 68.1 percent, compared with 74.0 percent in 2010.

GAAP net income in the fourth quarter of 2011 was $4.7 million or $0.11 per diluted share, compared with net income of $4.8 million or $0.13 per diluted share in the third quarter of 2011 and a net loss of ($0.5) million or ($0.02) per diluted share in the fourth quarter of 2010.

Non-GAAP net income in the fourth quarter of 2011 was a record $13.1 million, or $0.31 per diluted share, compared with $13.0 million or $0.31 per diluted share in the third quarter of 2011, and $7.7 million, or $0.21 per diluted share in the fourth quarter of 2010.  The fourth quarter 2011 non-GAAP net income excludes $6.1 million of share-based compensation expenses compared to $5.6 million in the third quarter of 2011, and compared to $3.7 million in the fourth quarter of 2010.  It also excludes amortization of acquired intangible assets of $2.4 million associated with the acquisition of Voltaire, Ltd. on February 7, 2011 compared to $2.6 million of such amortization expenses in the third quarter of 2011.  The fourth quarter 2010 non-GAAP net income also excludes $3.6 million of tax expenses related to utilization of deferred tax assets in Israel and acquisition related expenses of $0.9 million for Voltaire, Ltd.

GAAP net income in 2011 was $10.0 million or $0.26 per diluted share, compared with $13.5 million or $0.38 per diluted share in 2010.

Non-GAAP net income in 2011 was a record $45.6 million, or $1.07 per diluted share, compared with $36.7 million or $0.99 per diluted share in 2010.  2011 non-GAAP net income excludes $21.4 million of share-based compensation expenses, amortization of acquired intangible assets of $9.8 million associated with the acquisition of Voltaire, Ltd. on February 7, 2011 and acquisition related expenses of $4.4 million.  Had the company used the weighted shares outstanding method to calculate non-GAAP share count throughout 2011, its non-GAAP net income per diluted share would have been $1.16.  The company intends to adopt this calculation method in 2012.

Total cash and investments were $238.1 million at Dec. 31, 2011 compared to $253.3 million in 2010.  The company generated a record $22.2 million in cash from operating activities in the fourth quarter, and a record $63.1 million for the year.  In 2011, the company paid $203.7 million in cash for Voltaire and raised net $104.2 million in its additional public offering in September.  

“2011 was a record year for Mellanox.  Our strategy to offer leading-edge connectivity products to markets with increasing bandwidth and lower latency needs resulted in strong revenue and non-GAAP earnings growth.  Our first acquisition, Voltaire, has been successfully completed,” said Eyal Waldman, chairman, president and CEO of Mellanox Technologies.  “In 2011, we significantly penetrated new markets in addition to our traditional High Performance Computing (HPC) market, specifically, the Web 2.0, database, storage and cloud markets.  The upcoming launch of Intel Romley and Sandy Bridge platforms will drive the industry toward 10Gb/s and faster interconnect speeds, such as 40 and 56Gb/s.  We lead the industry with the fastest end-to-end interconnect solutions that provide a higher return-on-investment.  We expect to demonstrate continued growth in 2012 and 2013 as we further execute on our plan and serve the needs of additional markets and customers.”

Recent Mellanox Highlights

• Jan. 23 - Mellanox Announces New Pricing Structure, Enabling 10 Gigabit Ethernet for Worldwide Data Center Adoption Today

• Jan. 9 - Mellanox Announces World Lowest Latency for High-Frequency Trading

• Dec. 8 - Mellanox Joins the TA-25 Index on the TASE

• Nov. 15 - Mellanox I/O Solutions with PCI Express 3.0 Support Deliver World-Record Bandwidth and Latency Performance at Multiple, Large-Scale Deployments

• Nov. 15 - Mellanox FDR 56Gb/s InfiniBand Interconnect Solutions in the TOP500 Deliver Unrivaled Return-on-Investment

• Nov. 14 - Mellanox Announces Availability of ScalableSHMEM 2.0 and ScalableUPC 2.0 for High Performance Computing Applications

• Nov. 8 - Mellanox Announces Availability of UDA 2.0 for Big Data Analytic Acceleration

• Oct. 27 - Mellanox Joins Open Compute Project (OCP), and Introduces World’s First 10GbE Mezzanine Adapters for OCP Servers

Conference Calls
Mellanox will broadcast its fourth quarter and fiscal year 2011 financial results conference call today at 2 p.m. Pacific Time (5 p.m. Eastern). To listen to the call, dial 877-831-3840 approximately ten minutes prior to the start time. 

Mellanox will also conduct a conference call on Thursday, Jan. 26 at 9 a.m. Israel Time to discuss the company’s fourth quarter and fiscal year 2011 financial results in Hebrew.  To listen to the call, dial             +972-3-9180609 approximately 10 minutes prior to the start of the call. 

The Mellanox financial results conference call will be available via a live webcast on the investor relations section of the Mellanox website at http://ir.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 also be available on the Mellanox website.