Revised Outlook Reflects Accelerated Customer Transition from 10
Gigabit Ethernet Adapters to Mellanox’s 25 Gigabit and Above Ethernet in
Data Centers
Announces CFO Transition
SUNNYVALE, Calif. & YOKNEAM, Israel -- (Business Wire)
Mellanox Technologies, Ltd. (NASDAQ:MLNX), a leading supplier of
high-performance, end-to-end smart interconnect solutions for data
center servers and storage systems, today announced updates to its first
quarter outlook previously provided on its fourth quarter earnings call
and earnings release on January 18, 2018.
First Quarter 2018 Outlook
Mellanox currently projects:
-
Quarterly revenues of $240 million to $250 million
-
Non-GAAP gross margins of 68.5% to 69.5%
-
Non-GAAP operating expenses of $120 million to $122 million
-
Share based compensation expenses of $16.3 million to $16.8 million
-
Non-GAAP diluted share count to be in range of 52.4 million and 52.9
million
“Throughout the first quarter, it has become clear that the trends we
experienced at the end of 2017 are holding firm, and customer transition
from 10 gigabit per second to 25 gigabit per second Ethernet adapters is
accelerating across the board,” said Eyal Waldman, Chief Executive
Officer of Mellanox. “We are particularly pleased to see that this
widespread adoption of 25 gigabit per second technology covers the
majority of customer categories in every major market around the world,
a direct result of the strategy we have been executing on in recent
years. Our investment in R&D is driving product innovation and
sustainable long-term growth, and we are well positioned to capture
further market share as the landscape shifts to 25 gigabit per second
and beyond. In fact, Mellanox is already offering leading edge 25, 50
and 100 gigabit per second Ethernet solutions. We continue to build
momentum and make progress on our financial and operational initiatives,
by reducing our operating expense run rate and driving efficiencies in
our business, and are confident that our focused investment strategy
will continue to deliver positive results into the future.”
CFO Transition
Today, Mellanox also announced that Jacob Shulman has accepted an
executive position at a pre-IPO company and will step down as Chief
Financial Officer of Mellanox on May 4, 2018, after announcing fiscal
first quarter 2018 earnings and signing off on the filing of the first
quarter financials with the SEC.
The Company has been identifying and evaluating candidates to succeed
Mr. Shulman as CFO with the assistance of an executive search firm.
"On behalf of the Board and management team, I would like to thank Jacob
for his financial leadership and contributions to Mellanox,” said Mr.
Waldman. “Jacob played an instrumental role in building Mellanox’s solid
financial foundation. The Board of Directors, our employees and I are
grateful to Jacob for his service and wish him the best as he embarks on
an exciting new chapter in his career.”
Mr. Shulman said, “I joined Mellanox because I believed in our strategic
direction, and I continue to believe the Company is positioned to serve
our customers and deliver value to shareholders. We have made
substantial investments in innovation and R&D over the past five years,
and I look forward to seeing those investments bear fruit.”
Mr. Waldman continued, “During his tenure at Mellanox, Jacob added
talent and strength to our finance team, which will continue to execute
as we conduct the search for our next CFO. The Board and I are committed
to finding a strong successor, and are actively working to identify a
new finance leader with a proven track record of driving profitable
growth and taking decisive action to enable margin expansion.”
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About Mellanox
Mellanox Technologies (NASDAQ:MLNX) is a leading supplier of end-to-end
InfiniBand and Ethernet smart interconnect solutions and services for
servers and storage. Mellanox interconnect solutions increase data
center efficiency by providing the highest throughput and lowest
latency, delivering data faster to applications and unlocking system
performance capability. Mellanox offers a choice of fast interconnect
products: adapters, switches, software and silicon that accelerate
application runtime and maximize business results for a wide range of
markets including high performance computing, enterprise data centers,
Web 2.0, cloud, storage and financial services. More information is
available at: www.mellanox.com.
Note: Mellanox is a trademark of Mellanox Technologies, Ltd.
GAAP to Non-GAAP Reconciliation
To supplement its 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 expense,
amortization expense of acquired intangible assets, acquisition and
other charges, settlement costs, restructuring and related charges, and
income tax effects and adjustments. Acquisition and other charges
include expenses related to acquisitions of other companies and
non-routine shareholder matters. Restructuring and related charges
include costs that are the result of restructuring, consisting of
employee termination and severance costs, facilities related costs,
contract cancellation charges, and impairment of long-lived assets. The
purpose of income tax effects and adjustments is to exclude tax
consequences associated with the above excluded expenses items, as well
as the non-cash impact on the tax provision pertaining to changes in
deferred tax assets associated with carryforward losses of group
entities subject to tax holiday in Israel. 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 expense, amortization expense
of acquired intangible assets, acquisition and other charges, settlement
costs, restructuring and related charges, and income tax effects and
adjustments because it enhances investors’ ability to understand our
business from the same perspective as management, which believes that
such items are not directly attributable to nor reflect the underlying
performance of the company's business operations. Further, management
believes certain non-cash charges such as share-based compensation,
amortization of acquired intangible assets, impairment of long-lived
assets, changes related to recognition of deferred taxes and the net
impact on the Company’s tax provision for non-GAAP adjustments 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.
The Company has not reconciled its non-GAAP gross margins or non-GAAP
operating expenses to GAAP gross margins or GAAP operating expenses,
respectively, in this press release, because it does not provide an
outlook for GAAP gross margins or GAAP operating expenses due to
uncertainty and variability of acquired intangibles, acquisition related
costs, impairment charged and restructuring costs, which are reconciling
items between non-GAAP gross margins and non-GAAP operating expenses,
and GAAP gross margins and GAAP operating expenses, respectively. The
Company has not reconciled its non-GAAP diluted share count to GAAP
diluted share count in this press release because it does not provide an
outlook for GAAP diluted share count due to the uncertainty in its GAAP
net income (loss) due to variability of GAAP gross margins and operating
expenses described above. Because such items cannot be reasonably
predicted and could have a significant impact on the calculation of GAAP
gross margins, GAAP operating expenses and GAAP diluted share count, a
reconciliation of our outlook of these non-GAAP financial measures to
the corresponding GAAP measures is not available without unreasonable
effort.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
All statements included or incorporated by reference in this Current
Report, other than statements or characterizations of historical fact,
are forward-looking statements, including the Company’s outlook for the
three months ending March 31, 2018, statements related to trends in the
market for the Company’s solutions and services, opportunities for the
Company in the three months ending March 31, 2018 and beyond, and future
product capabilities. These forward-looking statements are based on the
Company’s current expectations, estimates and projections about the
Company’s industry and business, management’s beliefs and certain
assumptions made by the Company, all of which are subject to change.
Forward-looking statements can often be identified by words such as
“projects,” “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 the Company’s actual
results to differ materially and adversely from those expressed in any
forward-looking statement. The risks and uncertainties that could cause
the Company’s results to differ materially from those expressed or
implied by such forward-looking statements include the continued
expansion of the Company’s product line, customer base and the total
available market of the Company’s products, the continued growth in
demand for the Company’s products, the continued, increased demand for
industry standards-based technology, the Company’s ability to react to
trends and challenges in its business and the markets in which it
operates, the Company’s ability to anticipate market needs or develop
new or enhanced products to meet those needs, the adoption rate of the
Company’s products, the Company’s ability to establish and maintain
successful relationships with its OEM partners, the Company’s ability to
effectively compete in its industry, fluctuations in demand, sales
cycles and prices for the Company’s products and services, the Company’s
success converting design wins to revenue-generating product shipments,
the continued launch and volume ramp of large customer sales
opportunities, the Company’s ability to protect its intellectual
property rights, the Company’s ability to successfully acquire
businesses and technologies and to successfully integrate and operate
these acquired businesses, the Company’s success in realizing the
anticipated benefits of mergers and acquisitions, and the Company’s
ability to obtain debt at competitive rates or in sufficient amounts in
order to fund its contractual commitments. Furthermore, the majority of
the Company’s quarterly revenues are derived from customer orders
received and fulfilled in the same quarterly period. The Company has
limited visibility into actual end-user demand as such demand impacts
the Company and its OEM customer inventory balances in any given
quarter. Consequently, this introduces risk and uncertainty into the
Company’s revenue and production forecasts and business planning and
could negatively impact its financial results. In addition, current
uncertainty in the global economic environment poses a risk to the
overall economy as businesses may defer purchases in response to tighter
credit conditions, changing overall demand for the Company’s products,
and negative financial news. Consequently, the Company’s results could
differ materially from its prior results due to these general economic
and market conditions, political events and other risks and
uncertainties described more fully in the Company’s documents filed with
or furnished to the Securities and Exchange Commission (the “SEC”).
More information about the risks, uncertainties and assumptions that may
impact our business is set forth in the Company’s annual report on Form
10-K filed with the SEC on February 16, 2018. All forward-looking
statements in this press release, including the outlook for the three
months ending March 31, 2018, are based on information available to the
Company as of the date hereof, and the Company assumes no obligation to
update these forward-looking statements.
Important Additional Information and Where You Can Find It
The Company and certain of its directors and executive officers may be
deemed to be participants in a solicitation of proxies in connection
with the matters to be considered at the Company’s 2018 annual general
meeting of shareholders (the “2018 AGM”). Information regarding the
names of the Company’s directors and executive officers and their
respective interests in the Company by security holdings or otherwise is
set forth in the Company’s definitive proxy statement for its 2017
annual general meeting of shareholders filed with the SEC on March 22,
2017 and reports filed by the Company and Forms 3 and Forms 4 filed by
the Company’s executive officers and directors with the SEC after March
22, 2017. These documents are available free of charge at the SEC’s
website at www.sec.gov.
The Company intends to file a proxy statement and accompanying WHITE
proxy card with the SEC in connection with the solicitation of proxies
from the Company’s shareholders in connection with the matters to be
considered at the Company’s 2018 AGM. Additional information regarding
the identity of participants, and their direct or indirect interests, by
security holdings or otherwise, will be set forth in the Company’s proxy
statement for its 2018 AGM, including the schedules and appendices
thereto.
The Company intends to furnish its definitive proxy statement and WHITE
proxy card for its 2018 AGM to each shareholder entitled to delivery of
a proxy, and intends to file such definitive proxy statement and WHITE
proxy card with the SEC. THE COMPANY URGES ITS SHAREHOLDERS TO CAREFULLY
READ SUCH DEFINITIVE PROXY STATEMENT (INCLUDING ANY SUPPLEMENTS OR
AMENDMENTS THERETO), ACCOMPANYING WHITE PROXY CARD AND ANY OTHER
RELEVANT DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC, WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Copies
of the definitive proxy statement, any solicitation materials and any
other documents filed by the Company with the SEC will be made available
free of charge at the SEC’s website at www.sec.gov.
These documents will also be made available free of charge on the
Company’s website at www.mellanox.com
or by contacting the Company’s proxy solicitor, Mackenzie Partners, Inc.
at mlnxproxy@mackenziepartners.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180221006408/en/
Contacts:
Mellanox Technologies, Ltd.
Investor Contact
Jeffrey
Schreiner, 408-916-0012
jschreiner@mellanox.com
or
Media
Contact
Joele Frank, Wilkinson Brimmer Katcher
Jed Repko,
Jeff Kauth, Kaitlin Kikalo
415-869-3950 / 212-355-4449
or
Israel
PR Contact
Galai Communications Public Relations
Jonathan
Wolf, +972 3-613-52-84
yoni@galaipr.com
or
Israel
IR Contact
Gelbart Kahana Investor Relations
Emanuel
Kahana, +972 3-607-47-17
mano@gk-biz.com
Source: Mellanox Technologies, Ltd.
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