Mellanox Technologies, Ltd. (NASDAQ:MLNX) Q3 2018 Earnings Conference Call Transcript
Oct 24, 2018 • 05:00 pm ET
Good day, and welcome to the Mellanox Technologies Third Quarter Financial Results Conference Call. (Operator Instructions) And as a reminder, this conference is being recorded.
And now, I'd like to turn the conference over to Shanye Hudson from Mellanox Investor Relations. Please go ahead.
Thank you. Good afternoon, and welcome to Mellanox Technologies Third Quarter 2018 Conference Call. I am Shanye Hudson, the new Vice President of Investor Relations for Mellanox, and I'm thrilled to have joined the team here and look forward to working with you in the future. Leading the call will be Eyal Waldman, President and CEO of Mellanox Technologies; and Eric Johnson, Vice President and Corporate Controller.
By now you've seen our press release and associated financial information that we furnished to the SEC on Form 8-K earlier this afternoon. If not, you may access them on our website at ir.mellanox.com.
(Forward Looking Cautionary Statements)
With that, I'll turn the call over to you, Eyal.
Welcome, everyone, and thank you for joining our third quarter earnings call. Thank you Shanye and welcome to Mellanox as our new Vice President of Investor Relations. Shanye joined Mellanox last week, having most recently served as Head of Investor Relation at Micron Technology. Shanye's engineering background and nearly 20 years of semiconductor industry experience make her a strong candidate for our team, welcome onboard.
Mellanox delivered its third straight quarter with more than 24% year-over-year revenue growth by executing across all areas of our business. Our current financial results show the value of the investments we have made to develop leading technology, and we remain focused on driving the innovation that will maintain our strong performance across the markets we participate in.
Our leading-edge end-to-end Ethernet solutions have again delivered exceptional growth for us and further strengthened our leadership in the 25 gigabit per second and above Ethernet adapter market. Our latest HDR 200 gigabit InfiniBand release has increased our competitive advantage in the high performance compute and artificial intelligence market segments, and laid the foundation for increasing growth with this product in 2019 and beyond.
I will now share a brief financial overview of our third quarter. We delivered record revenue of $279.2 million, which is 24% year-over-year growth with 69.6% gross margin with operating expenses of $121.2 million. Our strong execution produced an operating margin of 26.2% on record operating income of $73.2 million, an increase of 90% year-over-year. We delivered $1.33 in diluted non-GAAP EPS, up 87% year-over-year. With this performance, we generated more than $66 million in cash flow from operations and ended the quarter with more than $350 million in cash and investments, up more than $67 million in Q3 alone from the end of Q2.
I'll turn now to the Ethernet side of the business. In the third quarter, our Ethernet business grew 59% year-over-year and approximately 12% sequentially, driven by strong demand for our high-speed Ethernet network adapters and LinkX cables and transceivers. In the latest update, from market analysts Crehan Research, Mellanox further