Mellanox Corporate Update · 2019-12-12 · Mellanox is the Market Leader in 25G+ Ethernet...

© 2019 Mellanox Technologies 1

Unleashing the Power of DataJanuary 2019

Mellanox Corporate Update


Safe Harbor Statement

These slides and the accompanying oral presentation contain forward-looking statementsand information. The use of words such as “may”, “might”, “will”, “should”, “expect”,“plan”, “anticipate”, “believe”, “estimate”, “project”, “intend”, “future”, “potential” or“continued”, and other similar expressions are intended to identify forward-lookingstatements. All of these forward-looking statements are based on estimates andassumptions by our management that, although we believe to be reasonable, areinherently uncertain. Forward-looking statements involve risks and uncertainties,including, but not limited to, economic, competitive, governmental and technologicalfactors outside of our control, that may cause our business, industry, strategy or actualresults to differ materially from the forward-looking statement. These risks anduncertainties may include those discussed under the heading “Risk Factors” in theCompany’s most recent 10K and 10Qs on file with the Securities and ExchangeCommission, and other factors which may not be known to us. Any forward-lookingstatement speaks only as of its date. We undertake no obligation to publicly update orrevise any forward-looking statement, whether as a result of new information, futureevents or otherwise, except as required by law.


We Live in a World of DataMore Devices

More Applications

More Data


Cloud &Web 2.0

Big Data

Enterprise

Business Intelligence

HPC

Storage

Security

AI & Machine Learning

Internet of Things

Exponential Data Growth Everywhere

Source: IDCHPC: High-Performance ComputeAI: Artificial Intelligence


Higher Data SpeedsFaster Data Processing

Better Data Security

Exponential Data Growth Everywhere

source: IDC


Exponential Growth of Data & Real Time AnalyticsRequires Mellanox High Throughput, Low Latency, Smart Interconnect Solutions

Data Growth is Driving Mellanox Growth

Higher Data SpeedsFaster Data Processing

Better Data Security

SmartNIC: Smart Network Interface Card

Adapters SwitchesCables &

Transceivers

SmartNIC System on a Chip


Industry Leaders Choose Mellanox Solutions

10 of Top 10 Automotive Manufacturers

3 of Top 5 Pharmaceutical Companies

9 of the Top 10 Oil and Gas Companies

9 of Top 10 Hyperscale Companies

5 of Top 6 Global Banks


Yosemite Platform with Multi-Host Technology Lowers Total Cost of Ownership

Higher Performance While Reducing System Footprint by 50%

Concurrent Streams From a Single Server For the Highest Quality Viewing Experience

Business Success Depends on MellanoxDeliver the Highest Data Center Return on Investment

Reduction in Database Recovery Time97%

ReductionOf Latency

Military Systems

Tier-1 Fortune100 Web 2.0 Company

Tier-1 Trading Institution 10X

4X

100K


Enabling Most Efficient Machine Learning PlatformsAllowing AI to Perform Critical & Real Time Decisions

Real Time Fraud Detection

18X Speedup For Image Recognition

4X Speedup For Image Recognition

Data Analytics Image Recognition

OCP Big Sur Artificial Intelligence Platform

Machine Learning System with 400Gb/s

World Record For Data Sort, 3X FasterOCP: Open Compute Project

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=kqGHk2rZStg0MM&tbnid=3uvyYV6a0huhCM:&ved=0CAgQjRwwAA&url=http://armsaroundthechild.org/ways-to-give/ways-to-give-usa/paypal/&ei=qn1VUZHFBcusrAelxoHIBw&psig=AFQjCNElUWNfaMlajpQ6OMT7WuBwrAmcoQ&ust=1364643626243740

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=kqGHk2rZStg0MM&tbnid=3uvyYV6a0huhCM:&ved=0CAgQjRwwAA&url=http://armsaroundthechild.org/ways-to-give/ways-to-give-usa/paypal/&ei=qn1VUZHFBcusrAelxoHIBw&psig=AFQjCNElUWNfaMlajpQ6OMT7WuBwrAmcoQ&ust=1364643626243740


Mellanox connects 53% of TOP500 platforms (265 systems), InfiniBand and Ethernet, 38% increase in 12 months (Nov’17-Nov’18)

Mellanox Connects 51% (130 systems) of TOP500 Ethernet Systems Representing Cloud and Hyperscale Infrastructures

InfiniBand Connects nearly 55% of the TOP500 HPC Platforms

InfiniBand Accelerates the Top Three, and Four of the Top Ten Supercomputers in the World (TOP500)

The Smart Choice for HPC and AI Platforms

InfiniBand Leadership

EthernetLeadership

InfiniBand Accelerates the Fastest HPC and AI Supercomputer in the World (TOP500)

Delivering the Highest Data Center Return on Investment

Source: Top500.org


Mellanox Empowers Leading Storage PlatformsDelivering the Highest Data Center ROI

SMB Direct

http://www.b4bschwaben.de/nachrichten/augsburg_artikel,-Fujitsu-praesentiert-sich-auf-der-CeBIT-2011-_arid,60375.html

http://www.b4bschwaben.de/nachrichten/augsburg_artikel,-Fujitsu-praesentiert-sich-auf-der-CeBIT-2011-_arid,60375.html

http://blog.executivebiz.com/2013/02/teradata-discovery-platforms-applications-to-help-define-big-data-in-2013/

http://blog.executivebiz.com/2013/02/teradata-discovery-platforms-applications-to-help-define-big-data-in-2013/


Software-Defined Network Intelligence

Mellanox is Enabling Data Centers of the Future - Today

Security Data Insights Real-Time

Highest Performance 100Gb/s, 200Gb/s and 400Gb/s Interconnect Solutions

Performance Efficiency Scalability


Comprehensive End-to-End PortfolioInfiniBand and Ethernet

Metro / WAN

Cables/Modules

Adapter Cards

ICs

Software

NPU & Multicore

Switches/Gateways


Leading Supplier of InfiniBand and EthernetEnd-to-End Interconnect SolutionsThe Smart Choice for Intelligent Compute and Storage Platforms

StorageFront /

Back-End

Server /Compute

Switch /Gateway

56/100/200G InfiniBand

10/25/40/50/100/200/400GbE

Virtual Protocol Interconnect

56/100/200G InfiniBand

10/25/40/50/100/200/400GbE

Virtual Protocol Interconnect


Highest Performance 100, 200 and 400Gb/s Interconnect Solutions

TransceiversActive Optical and Copper Cables (10 / 25 / 40 / 50 / 56 / 100 / 200Gb/s)

40 HDR (200Gb/s) Ports 80 HDR100 (100Gb/s) Ports 16Tb/s Throughput, 15.6 Billion msg/sec

Interconnect

Switch

Adapters200Gb/s, 0.6us Latency 200 Million Messages per Second(10 / 25 / 40 / 50 / 56 / 100 / 200Gb/s)

Switch16 400GbE Ports, 32 200GbE Ports64 100GbE Ports, 128 25/50GbE PortsThroughput of 6.4Tb/s

SoC

System on Chip and SmartNICProgrammable adapterSmart Offloads

SoC: System on Chip


Enabling the Future of Machine Learning

HPC and Machine Learning Share Same Interconnect Needs

Storage

High PerformanceComputing

Financial

EmbeddedAppliances

Database

Hyperscale

Machine Learning

IoT

Healthcare

Manufacturing

Retail

Self-Driving Vehicles


High-Speed Ethernet Adapter Market is Significantly Growing

10GbE 25GbE 40GbE 50GbE 100GbE

63% of total market22% →200GbE

10G

25G21%

40G1%

50G15%

100G20%

200G4%

37%63%Of TotalMarket

Source: Crehan Research Long Range Forecast Server-Class Adapter/Lom Controller (10G and greater), Jan ‘18TAM: Total Available Market

201825G+ Ethernet Adapter TAM

202225G+ Ethernet Adapter TAM

$1.5B10G

69%

11%

16%

40G

25G31%Of TotalMarket

$0.6B


Spectrum Delivers Highest Data Center ROI

Flexibility

Scalability

Programmability

TCO

Performance

10, 25, 40, 50, 100, 200 and 400 Gigabit Speeds, Variety of Port Configurations

10X Better Scalability, Optimized Data Center Utilization and End-User Experience

Programmable Flexible Parser and Packet Modifier, Support User-Defined Protocols

1.3X Lower Power Consumption Versus Competition

1.4X Lower Latency Versus Competition, Enable Real-Time Data Analysis and Insights

Open Ethernet


BlueField SmartNIC & Storage Controller Driving Future Growth

The New Generation of Intelligent Interconnect for Compute and Storage Platforms Broad Base of Customers Using ConnectX Can Seamlessly Transition to BlueField

On a Single Chip, BlueField combines: Market Leading ConnectX Adapter Technology ARM v8 Multicore Processors Two DDR4 DRAM Controllers PCIe Gen-4 Switch

NFV: Network Function Virtualization

Security Data Center Infrastructure Protection

Storage Enabling NVMe-over-Fabric Storage Platforms

Machine Learning The Most Efficient Machine Learning Systems

NFV Higher Performance & Flexibility at Lower Cost

BlueFieldARM Cores

Accelerators

PCIe Gen4

VPI(Ethernet/ InfiniBand)

DDR4 RAM


End-to-End Solutions for All Platforms

Highest Performance and Scalability for Intel, AMD, IBM Power,NVIDIA, Arm and FPGA-based Compute and Storage Platforms at10, 20, 25, 40, 50, 100, 200 and 400Gb/s Speeds

Unleashing the Power of all Compute Architectures

X86Open

POWERGPU ARM FPGA


Company Headquarters:

Mellanox Overview

Yokneam, IsraelSunnyvale, CaliforniaWorldwide Offices

~2,500Employees worldwide

$1.09B2018 Revenue

$5.012018 Non-GAAP EPS

$265M2018 Cash From Operations

$439M2018 Ending Cash & Investments

Ticker: MLNX


Boards Silicon

Systems Boards Silicon

Cables Systems Boards Silicon

Software Cables Systems Boards Silicon

Optics Software Cables Systems Boards Silicon

Processing Optics Software Cables Systems Boards Silicon

2001 20132004 2008 2011 2018

Mellanox Has A Long Track Record Of Delivering Breakthrough Technology

Source: Crehan Research, Mellanox internal estimates

As Bandwidth Goes Up, Mellanox’s Competitive Advantage From its Leading Offload Engine Capability Increases

10Gb/s 20Gb/s40Gb/s

56Gb/s

100Gb/s

200/400Gbps

■ #1 in InfiniBand Since 2004■ #1 in Ethernet NIC in 2016 / 2017■ #2 in Ethernet Switch Silicon in 2017

Leading Edge Products Across Technology Generations

Silicon photonics

Optical Interconnect Technology


Delivering Strong Financial Performance2018 Financial Results

Non-GAAP Operating Margin

Cash Flow from Operations

Cash and Investments

Revenue

Non-GAAP Gross Margin

Non-GAAP EPS

$1,088 million

$5.01

$264.9 million

$438.5 million

24.8%

69.2%

+26% YoY

70.4% in 2017

+120% YoY

+64% YoY

+60% YoY

13.7% in 2017

Reference reconciliation tables in back-up


Source: Crehan Research, Linley Group, LightCountingNote: Market segments may not sum to total due to rounding

Mellanox's Opportunity Is Significant with Multiple Growth Vectors

$1.6$2.5

$6.8

$9.0

$2.3

$2.8$2.6

$4.7

2017 2021

$13.2

$19.0

Segment ’17 – ’21 CAGR

Cables (10G+) 16%

Multicore Processors 6%

Switch (10G+) 7%

Adapter (10G+) 12%

Total 9%

($ in billions)

Mellanox’s strong product cycles and share gain momentum should allow the Company to grow substantially above the market at rates of mid-double digits or higher.


Market Waves: 25 Gb/s and Above Ethernet Adapter

$0M

$200M

$400M

$600M

$800M

$1,000M

$1,200M

$1,400M

$1,600M

2017 2018 2019 2020 2021 2022

200G

100G

50G

40G

25G

Source: Crehan Long-range Forecast – Ethernet Adapter forecast, July 2018

25G+ Ethernet Adapter Market Waves

Each Transition to Faster Ethernet Adapter Speeds Represent aMulti-Year Growth Wave for Mellanox(10G25G50G100G…)


Positioned For Significant Growth In High-Speed Ethernet Adapters

Mellanox 69%

Broadcom 6%

Intel 14%

Others 11%

■ First to Market with 25/40/50/100 Gb/s Ethernet Adapters

■ Broad and expanding portfolio of offload engines creates a competitive advantage - lowers TCO, improves operational efficiency

Mellanox is the Market Leader in25G+ Ethernet Adapters1

25G+ Ethernet Adapter Market is Growing Rapidly

$636M

2018 2022

$1,450M

Source: Crehan Quarterly Market Share Server-Class Adapter-LOM-Controller 3Q 2018125, 40, 50, and 100 Gb/s Adapter2Crehan Long-range Forecast - Server-Class Adapter-LOM-Controller, January 2019

2


Mellanox Revenue Breakdown

($ in millions)

25G+ Ethernet Switch and Adapter Market

($ in billions)

25G+ Adapter…

25G+ Switch…

25G+ Adapter…

25G+ Switch $6.1

$3.1BN $7.3BNSource: Crehan Long-range Forecast – Data Center Switch, January 2018

Crehan Long-range Forecast – Server-Class Adapter-LOM-Controller, January 2019

Mellanox has Expanded into High-Growth Ethernet Market

Ethernet$83

Other$43

InfiniBand$338

20182014

InfiniBand $438

Ethernet$618

Other$32

$1,088M$464M

2021E2017


InfiniBandHigh End

Ethernet NICHigh End

Ethernet SwitchSmart NIC

Cables andTransceivers

Broad Data Center Portfolio

Source: Crehan Research, Mellanox internal estimates

Mellanox Now Has a Leading InfiniBand and Ethernet Product Portfolio Targeting the Data Center

#1Since 2004

#1Since 2016

#2Since 2017

NewLeading Technology

Rapid Share Gains


Delivering Record Financial Performance in 2018

$52.0

$80.1

$150.5

$196.1

$161.3

$264.9

2013 2014 2015 2016 2017 2018

5-Year CAGR 38%

$390$464

$658

$858 $864

$1,088

2013 2014 2015 2016 2017 2018

($ in Millions) ($ in Millions)

Achieved $1.1 Billion in Annual Revenue

Generated $264.9 Million in Operational Cash Flow

5-Year CAGR 23%


($ in Millions)

Quarterly Revenue Growth Trend

$99.0 $102.6

$120.7

$141.1 $146.7

$163.1$171.4 $176.9

$196.8

$214.8$224.2 $221.7

$188.7

$212.0$225.7

$237.6$251.0

$268.5$279.2

$290.1$300.0

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

1 Based on mid-point of 1Q 2019 revenue guidance range of $295M - $305M, provided on January 30, 2019

E1

E1


$10.5$7.3

$17.2

$45.0 $45.8$41.3

$28.7

$34.7

$48.6$44.8

$48.7$54.0

$35.0

$6.4

$53.0

$66.9

$55.4

$46.7

$66.4

$96.4

Record

($ in Millions)

Consistently Generating Operational Cash Flow


Strong Balance Sheet

$328

$274

$439

2016 2017 2018

$243

$73

$0

2016 2017 2018

Maintained Stable Cash and Investments

Successfully Retired Debt1

1 Reflects Term Debt

($ in Millions)


Delivering Strong Operating Leverage

Focused on Profitable Growth

$251

$268$279

$290

$52

$66$73

$79

20.8%

24.7%

26.2%27.1%

1Q18 2Q18 3Q18 4Q18

Revenue

Non-GAAP Operating Profit

Non-GAAP Operating Margin

($ in Millions)

Reference reconciliation tables in back-up


Maintain the best ISS overall “QualityScore” of 1 since May 2017, indicating lowest risk

ISS measures up to 80 factors to identify potential risks and concerns for investors in 4 categories: Board Structure

Compensation

Shareholder Rights

Audit & Risk Oversight

Scoring is entirely data-driven based on SEC filings by the Company and peers in the Russell 3000 Index

Rated Highest ISS Corporate Governance Score


■ Exponential growth of data creating significant opportunities

for Mellanox ($19B TAM)

■ Leading interconnect solutions supplier, offering technology

that is critical to data center performance at the highest ROI

■ Diversified business with comprehensive end-to-end Ethernet,

InfiniBand and multi-core processor product portfolio

■ Leading the transition to Exascale computing; first to market

with 200G HDR InfiniBand with 400G NDR under development

■ Benefiting from multi-year growth opportunities driven by the

transition to 25G+ Ethernet technology

■ Demonstrating revenue growth, strong cash flow generation

and increasing profitability

Summary


Thank You


Back-up Reconciliation Tables

GAAP gross profit to non-GAAP FY2017 FY2018 Q1'18 Q2'18 Q3'18 Q4'18 GAAP operating expenses to non-GAAP FY2017 FY2018 Q1'18 Q2'18 Q3'18 Q4'18

GAAP gross profit $563 $700 $162 $164 $184 $190 GAAP operating expenses $581 $588 $150 $148 $144 $146

Share-based compensation expense 2 2 1 1 - - Share-based compensation expense (67) (70) (15) (15) (19) (22)

Amortization of acquired intangibles 43 42 11 11 10 10 Amortization of acquired intangibles (10) (9) (2) (2) (3) (2)

Settlement costs - 9 - 9 - - Acquisition and other charges (3) (16) (4) (11) (1) -

Non-GAAP gross profit $608 $753 $174 $185 $194 $200 Restructuring and related charges (12) (10) (8) (2) - -

Non-GAAP gross profit % 70% 69% 69% 69% 70% 69% Non-GAAP operating expenses $489 $483 $122 $119 $121 $122

GAAP SG&A to non-GAAP FY2017 FY2018 Q1'18 Q2'18 Q3'18 Q4'18 GAAP income (loss) from operations to non-GAAP FY2017 FY2018 Q1'18 Q2'18 Q3'18 Q4'18

GAAP SG&A $203 $217 $56 $59 $50 $52 GAAP income (loss) from operations ($17) $112 $12 $17 $40 $44

Share-based compensation expense (27) (31) (7) (6) (8) (10) Share-based compensation expense 69 71 15 15 19 22

Amortization of acquired intangibles (9) (8) (2) (2) (2) (2) Amortization of acquired intangibles 52 51 13 13 12 12

Acquisition and other charges (2) (15) (4) (10) (1) - Acquisition and other charges 3 16 4 10 1 1

Non-GAAP SG&A $165 $163 $43 $41 $39 $40 Settlement costs - 9 - 9 - -

Restructuring and related charges 12 11 8 2 1 -

Non-GAAP income (loss) from operations $119 $270 $52 $66 $73 $79

GAAP R&D to non-GAAP FY2017 FY2018 Q1'18 Q2'18 Q3'18 Q4'18 Non-GAAP income from operations % 14% 25% 21% 25% 26% 27%

GAAP R&D $366 $360 $86 $87 $93 $94

Share-based compensation expense (40) (39) (8) (8) (11) (12)

Amortization of acquired intangibles (1) (1) (1) - - -

Acquisition and other charges (1) - - - - -

Non-GAAP R&D $324 $320 $77 $79 $82 $82

Mellanox Corporate Update · 2019-12-12 · Mellanox is the Market Leader in 25G+ Ethernet...

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Transcript of Mellanox Corporate Update · 2019-12-12 · Mellanox is the Market Leader in 25G+ Ethernet...