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Mellanox Technologies' (MLNX) CEO Eyal Waldman on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 20, 2016 05:00 PM ET

Executives

Eyal Waldman - President and CEO

Jacob Shulman - CFO

Analysts

John Pitzer - Credit Suisse

Joseph Wolf - Barclays

Kevin Cassidy - Stifel

Andrew Nowinski - Piper Jaffray

Daniel Amir - Ladenburg

Mark Kelleher - D.A. Davidson

James Kisner - Jefferies LLC

Srini Nandury - Summit Research

Alex Kurtz - Sterne Agee

Rajesh Ghai - Macquarie

Suji Desilva - Topeka

Operator

Good morning, and welcome to the Mellanox Technologies First Quarter 2016 Financial Results Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions] And as a remainder, this conference is being recorded.

And now, I would like to turn the conference over to Mellanox. Please go ahead.

Unidentified Company Representative

Good afternoon and welcome to Mellanox Technologies' first quarter 2016 conference call. Leading the call today will be Eyal Waldman, President and CEO of Mellanox Technologies; and Jacob Shulman, Chief Financial Officer. By now you've seen our press release and associated financial information that we furnished to the SEC on Form 8-K this afternoon, if not you may access them on our website at ir.mellanox.com.

As a reminder, today's discussion includes predictions, expectations, estimates and other information, all of which we consider to be forward-looking statements. Throughout today's discussion, we present important factors relating to our business that may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent SEC reports including our 10-K and 10-Q for a complete discussion of these factors and other risks that may affect our future results or the market price of our ordinary shares. Finally, we are not obligating ourselves to revise our results or publicly release any revisions to these forward-looking statements in light of new information or future events.

Now, I will turn the call over to Eyal for his opening remarks, Eyal?

Eyal Waldman

Thank you. Good afternoon everyone and thank you for joining us. I am pleased to report another record quarter for Mellanox. First quarter revenues were $196.8 million equaling to year-over-year growth of 34.2%, establishing a new quarterly revenue record for the fourth consecutive quarter. We continue to see diversification in our revenues. In the first quarter our Ethernet revenues saw strong growth driven by the contribution from 40 gigabit Ethernet adapters and the EZchip acquisition.

First quarter non-GAAP operating income was $41.3 million or 21% of revenue. Reported non-GAAP earning per share was $0.81 demonstrating year-over-year growth of 35%. We generated $48.6 million in cash from operations. During the first quarter, we closed our seventh and largest acquisition EZchip. The combination of EZchip’s intelligent network processors and multi-core processors and Mellanox’s leading interconnect technology expands our total available market by over $2 billion to $14 billion in 2017. In the future, we expect to integrate technology derived from EZchip and Mellanox and offer also intelligent silicon and system-level solutions targeting end markets such as cloud, telco, storage, Web 2.0, embedded and more.

In early March, we began shipping EZchip’s NPS-400 to customers. We are pleased with the initial interest in this product and I'm happy to report our EZchip integration efforts remain on track. In the first quarter, Mellanox’s Ethernet products remained in the spotlight at major industry conferences. At the Open Compute Project Conference, Mellanox showcased in spectrum 10, 25, 40, 50 and 100 gigabit per second Ethernet switch running five different network operating systems including Microsoft SONiC, HP OpenSwitch, Cumulus, Metaswitch and Mellanox OS.