Mellanox Technologies, Ltd. Net Income surged on 791% and Revenue surged on 26.0%
01/30/2019 • About Mellanox Technologies, Ltd. (
$MLNX) • By InTwits
Mellanox Technologies, Ltd. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Mellanox Technologies, Ltd. is a fast growth stock: 2018 revenue growth was 26.0%, 5 year revenue CAGR was 22.8% at 2018 ROIC 9.2%
- EBITDA Margin is quite volatile: 19.6% in 2018, 10.0% in 2017, 15.0% in 2016, 17.7% in 2015, 6.8% in 2014
- Mellanox Technologies, Ltd. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 7.7% while average EBITDA Margin was 14.7% for the sames years
- Mellanox Technologies, Ltd. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.4%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $31m in 2018, $37m in 2017, $14m in 2016, $14m in 2015, $7m in 2014
- In the last 5 years the company invested considerably less than D&A: $199m vs. $383m. In 2018 this situation was still the same: CAPEX was 36 while D&A was 102
- The company has business model with low profitability: ROIC is 9.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 26.0%. Revenue growth showed slowdown in 18Q4 - it was 22.1% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 16.3 pp from 51.6% to 35.3% in 2018.
Gross Margin decreased slightly on 0.91 pp from 65.2% to 64.3% in 2018. SG&A as a % of Revenue decreased on 3.5 pp from 23.5% to 20.0% in 2018. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.4 pp from 8.0% to 6.6% in 2018.
Net Income margin jumped on 14.6 pp from -2.2% to 12.3% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 3.3%. CAPEX/Revenue decreased on 4.0 pp from 7.4% in 2015 to 3.3% in 2018. It's average CAPEX/Revenue for the last three years was 4.4%. CAPEX as a % of Revenue followed a declining trend at -0.88 pp per annum in 2014-2018.
Accounts receivable as a % of Revenue decreased on 4.0 pp from 17.9% to 13.8% in 2018. Inventories as a % of Revenue increased on 2.1 pp from 7.5% to 9.6% in 2018. Accounts payable as a % of Revenue decreased slightly on 1.6 pp from 19.7% to 18.1% in 2018.
Mellanox Technologies, Ltd. has spent
$7m on M&A in 2018 which accounts for 0.68% of revenue.
Return on investment
The company operates at low ROIC (9.2%) and ROE (11.4%). ROIC surged on 10.7 pp from -1.5% to 9.2% in 2018. ROE jumped on 13.3 pp from -1.9% to 11.4% in 2018.
Leverage (Debt)
The company paid down all the debt in 2018. Cash decreased on 9.1%.
Valuation and dividends
Mellanox Technologies, Ltd.'s trades at EV/EBITDA 24.2x and P/E 39.0x.
Management team
Eyal Waldman is a Mellanox Technologies, Ltd.'s CEO. Eyal Waldman is a founder and has spent 6 years with the company. CEO total compensation was
$7,897,858 in 2018 which included
$608,668 salary. Mellanox Technologies, Ltd.'s CFO Douglas T Ahrens "Doug" has spent 0 years with the company.
The company has 4.9% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 2,330 employees. The number of employees decreased on 4.8%. Average revenue per employee in 2018 was
$467,272 and it jumped on 32.4%.
Financial and operational results
FY ended 12/31/2018
Mellanox Technologies, Ltd. ($MLNX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 464 | 658 | 857 | 864 | 1,089 | 26.0% |
| Gross Profit | 315 | 469 | 556 | 563 | 700 | 24.3% |
| SG&A | 113 | 142 | 202 | 203 | 217 | 7.3% |
| EBITDA | 31 | 116 | 128 | 87 | 214 | 146.3% |
| EBIT | -7 | 75 | 31 | -17 | 112 | |
| Tax | 18 | -18 | 6 | -2 | -22 | |
| Net Income | -24 | 93 | 19 | -19 | 134 | |
| Stock Based Compensation | 47 | 51 | 66 | 69 | 71 | 3.6% |
Balance Sheet
|
|---|
| Cash | 51 | 263 | 57 | 62 | 57 | -9.1% |
| Accounts Receivable | 65 | 84 | 142 | 154 | 151 | -2.3% |
| Inventory | 44 | 62 | 66 | 65 | 104 | 61.4% |
| Accounts Payable | 40 | 45 | 60 | 59 | 70 | 19.0% |
| Short Term Debt | 1 | 0 | 24 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 219 | 73 | 0 | -100.0% |
Cash flow
|
|---|
| Capex | 30 | 49 | 43 | 41 | 36 | -12.2% |
| Acquisitions | 2 | | 694 | 1 | 7 | 746.2% |
Ratios
|
|---|
| Revenue growth | 18.8% | 41.9% | 30.3% | 0.7% | 26.0% | |
| EBITDA growth | 112.3% | 270.0% | 10.2% | -32.4% | 146.3% | |
|
|---|
| Gross Margin | 67.9% | 71.3% | 64.8% | 65.2% | 64.3% | -0.9% |
| EBITDA Margin | 6.8% | 17.7% | 15.0% | 10.0% | 19.6% | 9.6% |
| EBIT Margin | -1.6% | 11.4% | 3.6% | -2.0% | 10.3% | 12.3% |
| SG&A, % of revenue | 24.4% | 21.5% | 23.6% | 23.5% | 20.0% | -3.5% |
| SBC, % of revenue | 10.1% | 7.7% | 7.7% | 8.0% | 6.6% | -1.4% |
| Net Income Margin | -5.2% | 14.1% | 2.2% | -2.2% | 12.3% | 14.6% |
| CAPEX, % of revenue | 6.5% | 7.4% | 5.0% | 4.8% | 3.3% | -1.5% |
|
|---|
| ROIC | -1.0% | 9.6% | 2.9% | -1.5% | 9.2% | 10.7% |
| ROE | -3.5% | 11.8% | 2.0% | -1.9% | 11.4% | 13.3% |
| Net Debt/EBITDA | -1.6x | -2.3x | 1.4x | 0.1x | -0.3x | -0.4x |
People
|
|---|
| Insider ownership | 4.9% | 4.9% | 4.9% | 4.9% | 4.9% | 0.0% |
| Employees | 1,549 | 1,922 | 2,395 | 2,448 | 2,330 | -4.8% |
| Revenue/Employee, th. $ | 299 | 342 | 358 | 353 | 467 | 32.4% |
Mellanox Technologies, Ltd. ($MLNX) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 251 | 268 | 279 | 290 | | 33.0% | 26.7% | 23.7% | 22.1% |
| EBITDA | 38 | 43 | 64 | 68 | | 204.6% | -7.8% | 98.9% | 231.4% |
| Net Income | 38 | 17 | 37 | 43 | | | | 989.0% | |
Balance Sheet
|
|---|
| Cash | 91 | 63 | 64 | 57 | | 55.2% | 13.8% | 10.0% | -9.1% |
| Short Term Debt | 34 | 0 | 0 | 0 | | 141.3% | -100.0% | -100.0% | |
| Long Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | -100.0% | -100.0% |
Ratios
|
|---|
| Gross Margin | 64.5% | 61.4% | 65.8% | 65.4% | | -1.3% | -4.0% | 0.0% | 1.3% |
| EBITDA Margin | 15.3% | 15.9% | 23.0% | 23.5% | | 8.6% | -6.0% | 8.7% | 14.8% |
| Net Income Margin | 15.1% | 6.2% | 13.3% | 14.8% | | 21.6% | 9.9% | 11.8% | 15.9% |
Peers in Semiconductors
Below we provide Mellanox Technologies, Ltd. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 4.4% | 11.0% | 4.7% |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | | 41.9% | 30.3% | 0.7% | 26.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 47.2% | 48.6% | 50.4% |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | 67.9% | 71.3% | 64.8% | 65.2% | 64.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.9% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | 6.8% | 17.7% | 15.0% | 10.0% | 19.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.6% |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | 6.5% | 7.4% | 5.0% | 4.8% | 3.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.7% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | -1.0% | 9.6% | 2.9% | -1.5% | 9.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.2x | -0.0x | 0.4x | 0.3x |
|---|
| Mellanox Technologies, Ltd. ($MLNX) | -1.6x | -2.3x | 1.4x | 0.1x | -0.3x |
