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Super Micro Computer, Inc. Announces 2nd Quarter 2014 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Super Micro Computer, Inc. (NASDAQ:SMCI), a leader in application optimized, high performance server solutions, today announced second quarter fiscal 2014 financial results for the quarter ended December 31, 2013.

Fiscal 2nd Quarter Highlights

Net sales for the second quarter ended December 31, 2013 totaled $356.4 million, up 15.3% from $309.0 million in the first quarter of fiscal year 2014. No customer accounted for more than 10% of net sales during the quarter ended December 31, 2013.

GAAP net income for the second quarter of fiscal year 2014 was $13.3 million or $0.30 per diluted share, an increase of 171.4% from the net income of $4.9 million, or $0.11 per diluted share in the same period a year ago. Included in net income for the quarter is $2.8 million of stock-based compensation expense (pre-tax). Excluding this item and the related tax effect, non-GAAP net income for the second quarter was $15.9 million, or $0.35 per diluted share, compared to non-GAAP net income of $7.8 million, or $0.18 per diluted share, in the same quarter of the prior year. On a sequential basis, non-GAAP net income increased from the first quarter of fiscal year 2014 by $6.0 million or $0.13 per diluted share.

GAAP and Non-GAAP gross margins for the second quarter were both 15.5% compared to 13.8% in the same period a year ago. GAAP gross margin and Non-GAAP gross margin for the first quarter of fiscal year 2014 were 15.1% and 15.2%, respectively.

The Company's cash and cash equivalents and short and long term investments at December 31, 2013 were $92.6 million compared to $95.7 million at June 30, 2013. Free cash flow for the six months ended December 31, 2013 was $(15.6) million primarily due to the purchase of real property in San Jose, California for $30.1 million partially offset by an increase in cash provided by operating activities for $18.4 million.

Business Outlook & Management Commentary

The Company expects net sales of $320 million to $350 million for the third quarter of fiscal year 2014 ending March 31, 2014. The Company expects non-GAAP earnings per diluted share of approximately $0.24 to $0.30 for the third quarter.

"Supermicro's second quarter was a record high for revenue and earnings. We grew revenue 22.3% higher than last year with significant jump in Asia revenues to 23% of revenues. Our Twin family, especially the FatTwin, storage and GPU/Xeon Phi product lines were strong drivers to revenue growth," said Charles Liang, CEO and President of Supermicro. "We are looking forward to strong growth in calendar 2014 because of our foundation in global capacity and in strong product innovation with upcoming launches of our TwinPro series with SAS 3 and NVMe and with MicroBlade, the industry's densest low power server."

It is currently expected that the outlook will not be updated until the Company's next quarterly earnings announcement, notwithstanding subsequent developments. However, the Company may update the outlook or any portion thereof at any time. Such updates will take place only by way of a news release or other broadly disseminated disclosure available to all interested parties in accordance with Regulation FD.

Conference Call Information

Super Micro Computer will discuss these financial results in a conference call at 2:00 p.m. PT, today. To participate in the conference call, please call 1-888-437-9445 (international callers dial 1-719-325-2177) 10 minutes prior. A recording of the conference call will be available until 11:59 pm ET on Tuesday, February 4, 2014 by dialing 1-877-870-5176 (international callers dial 1-858-384-5517) and entering replay PIN 9732681. The live web cast and recording of the call will be available on the Investor Relations section at www.supermicro.com two hours after the conference call conclusion. They will remain available until the Company's next earnings call.

Cautionary Statement Regarding Forward Looking Statements

Statements contained in this press release that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may relate, among other things, to our expected financial and operating results, our ability to build and grow Super Micro Computer, the benefits of our products and our ability to achieve our goals, plans and objectives. Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from those anticipated. These include, but are not limited to: our dependence on continued growth in the markets for X86, blade servers and embedded applications, increased competition, difficulties of predicting timing, introduction and customer acceptance of new products, poor product sales, difficulties in establishing and maintaining successful relationships with our distributors and vendors, shortages or price fluctuations in our supply chain, our ability to protect our intellectual property rights, our ability to control the rate of expansion domestically and internationally, difficulty managing rapid growth and general political, economic and market conditions and events. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in our filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in such filings.

Use of Non-GAAP Financial Measures

Non-GAAP gross margin discussed in this press release excludes stock-based compensation expense. Non-GAAP net income and net income per share discussed in this press release exclude stock-based compensation expense and the related tax effect of the applicable items. Management presents non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the Company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company's financial and operational performance. However, these non-GAAP financial measures have limitations as an analytical tool, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. Pursuant to the requirements of SEC Regulation G, detailed reconciliations between the Company's GAAP and non-GAAP financial results is provided at the end of this press release. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company's SEC filings.

About Super Micro Computer, Inc.

Supermicro® (NASDAQ: SMCI), a global leader in high-performance, high-efficiency server technology and innovation is a premier provider of end-to-end green computing solutions for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and Embedded Systems worldwide. Supermicro's advanced Server Building Block Solutions® offer a vast array of components for building energy-efficient, application-optimized, computing solutions. Architecture innovations include Twin, FatTwin™, MicroCloud, MicroBlade, SuperBlade®, Double-sided Storage®, Battery Backup Power (BBP®) modules and WIO/UIO. Products include servers, blades, GPU systems, workstations, motherboards, chassis, power supplies, storage, networking, server management software and SuperRack® cabinets/accessories delivering unrivaled performance and value.

Founded in 1993 and headquartered in San Jose, California, Supermicro is committed to protecting the environment through its "We Keep IT Green®" initiative. The Company has global logistics and operations centers in Silicon Valley (USA), the Netherlands (Europe) and its Science & Technology Park in Taiwan (Asia).

Supermicro, FatTwin, SuperBlade, Double-Sided Storage, BBP, SuperRack, Building Block Solutions and We Keep IT Green are trademarks and/or registered trademarks of Super Micro Computer, Inc. All other brands, names and trademarks are the property of their respective owners.

 
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  December 31,   June 30,
2013 2013
ASSETS
Current assets:
Cash and cash equivalents $ 89,883 $ 93,038
Accounts receivable, net 161,174 149,340
Inventory 290,927 254,170
Deferred income taxes - current 15,503 15,786
Prepaid income taxes 4,592 4,039
Prepaid expenses and other current assets 5,504   6,819  
Total current assets 567,583 523,192
Long-term investments 2,637 2,637
Property, plant and equipment, net 128,072 95,912
Deferred income taxes - noncurrent 7,316 7,275
Other assets 3,123   3,241  
Total assets $ 708,731   $ 632,257  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 205,758 $ 172,855
Accrued liabilities 35,929 34,122
Income taxes payable 7,747 6,049
Short-term debt and current portion of long-term debt 37,208   28,638  
Total current liabilities 286,642 241,664
Long term debt-net of current portion 5,133 6,533
Other long-term liabilities 11,169   10,336  
Total liabilities 302,944 258,533
Stockholders' equity:
Common stock and additional paid-in capital 168,755 157,712
Treasury stock (at cost) (2,030 ) (2,030 )
Accumulated other comprehensive loss (70 ) (69 )
Retained earnings 238,964     217,930  
Total Super Micro Computer Inc. stockholders' equity 405,619 373,543
Noncontrolling interest 168   181  
Total stockholders' equity 405,787   373,724  
Total liabilities and stockholders' equity $ 708,731   $ 632,257  
 
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
       
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2013

2012

2013 2012
Net sales $ 356,362 $ 291,487 $ 665,378 $ 562,194
Cost of sales 301,270   251,365   563,494   487,057  
Gross profit 55,092 40,122 101,884 75,137
Operating expenses:
Research and development 20,428 18,824 40,664 37,045
Sales and marketing 8,976 7,945 17,841 16,711
General and administrative 5,484   5,745   11,132   12,091  
Total operating expenses 34,888   32,514   69,637   65,847  
Income from operations 20,204 7,608 32,247 9,290
Interest and other income, net 46 7 63 22
Interest expense (184 ) (152 ) (379 ) (307 )
Income before income tax provision 20,066 7,463 31,931 9,005
Income tax provision 6,731   2,549   10,897   3,192  
Net income $ 13,335   $ 4,914   $ 21,034   $ 5,813  
Net income per common share:
Basic $ 0.31   $ 0.12   $ 0.49   $ 0.14  
Diluted $ 0.30   $ 0.11   $ 0.47   $ 0.13  
Weighted-average shares used in calculation of net income per common share:
Basic (a) 42,915   41,893   42,706   41,780  
Diluted (b) 45,039   43,431   45,052   43,819  
 
 

Stock-based compensation is included in the following cost and expense
categories by period (in thousands):

Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2013 2012 2013 2012
Cost of sales $ 245 $ 224 $ 480 $ 464
Research and development 1,709 1,632 3,270 3,262
Sales and marketing 305 389 619 793
General and administrative 529 664 1,008 1,293
 
SUPER MICRO COMPUTER, INC
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(In thousands)
(Unaudited)
 

Six Months Ended
December 31,

2013   2012
OPERATING ACTIVITIES:
Net income $ 21,034 $ 5,813
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 2,920 3,974
Stock-based compensation expense 5,377 5,812
Excess tax benefits from stock-based compensation (1,084 ) (785 )
Allowance for doubtful accounts 1,076 75
Provision for inventory 1,538 6,313
Exchange loss (gain) (115 ) 278
Deferred income taxes 242 (3,982 )
Changes in operating assets and liabilities:
Accounts receivable, net (12,910 ) (16,973 )
Inventory (38,295 ) 26,689
Prepaid expenses and other assets 1,428 699
Accounts payable 31,950 (25,094 )
Income taxes payable, net 2,677 679
Accrued liabilities 1,760 2,203
Other long-term liabilities   797     (98 )
Net cash provided by operating activities   18,395     5,603  
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (33,956 ) (2,790 )
Restricted cash (8 ) (12 )
Proceeds from investments       300  
Net cash used in investing activities   (33,964 )   (2,502 )
 
FINANCING ACTIVITIES:
Proceeds from debt 8,576 20,641
Repayment of debt (1,400 ) (16,673 )
Proceeds from exercise of stock options 4,785 780
Excess tax benefits from stock-based compensation 1,084 785
Payment of obligations under capital leases (15 ) (18 )
Advances (payments) under receivable financing arrangements 41 (584 )
Contribution from noncontrolling interests 168
Minimum tax withholding paid on behalf of an officer for restricted stock awards   (651 )   (1,022 )
Net cash provided by financing activities   12,420     4,077  
Effect of exchange rate fluctuations on cash (6 ) 394
Net increase (decrease) in cash and cash equivalents (3,155 ) 7,572
Cash and cash equivalents at beginning of period   93,038     80,826  
Cash and cash equivalents at end of period

$

89,883

 

$

88,398

 
Supplemental disclosure of cash flow information:
Cash paid for interest

$

378

$

409

Cash paid for taxes, net of refunds

$

6,840

$

6,448

Non-cash investing and financing activities:
Accrued costs for property, plant and equipment purchases

$

2,891

$

1,080

 
SUPER MICRO COMPUTER, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
       
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2013 2012 2013 2012
GAAP GROSS PROFIT $ 55,092 $ 40,122 $ 101,884 $ 75,137
Add back stock-based compensation (c) 245   224   480   464  
Non-GAAP GROSS PROFIT $ 55,337   $ 40,346   $ 102,364   $ 75,601  
 
GAAP GROSS MARGIN 15.5 % 13.8 % 15.3 % 13.4 %
Add back stock-based compensation (c) 0.0 % 0.0 % 0.1 % 0.0 %
Non-GAAP GROSS MARGIN 15.5 % 13.8 % 15.4 % 13.4 %
 
GAAP INCOME FROM OPERATIONS $ 20,204 $ 7,608 $ 32,247 $ 9,290
Add back stock-based compensation (c) 2,788   2,909   5,377   5,812  
Non-GAAP INCOME FROM OPERATIONS $ 22,992   $ 10,517   $ 37,624   $ 15,102  
 
GAAP NET INCOME $ 13,335 $ 4,914 $ 21,034 $ 5,813
Add back stock-based compensation (c) 2,788 2,909 5,377 5,812
Add back adjustments to tax benefit (provision) (d) (239 ) 3   (653 ) (746 )
Non-GAAP NET INCOME $ 15,884   $ 7,826   $ 25,758   $ 10,879  
 
GAAP NET INCOME PER COMMON SHARE - BASIC (a) $ 0.31 $ 0.12 $ 0.49 $ 0.14
Add back stock-based compensation and adjustments to tax provision (c) (d) 0.06   0.07   0.11   0.12  
Non-GAAP NET INCOME PER COMMON SHARE - BASIC (e) $ 0.37   $ 0.19   $ 0.60   $ 0.26  
 
GAAP NET INCOME PER COMMON SHARE - DILUTED (b) $ 0.30 $ 0.11 $ 0.47 $ 0.13
Add back stock-based compensation and adjustments to tax provision (c) (d) 0.05   0.07   0.10   0.12  
Non-GAAP NET INCOME PER COMMON SHARE - DILUTED (f) $ 0.35   $ 0.18   $ 0.57   $ 0.25  
 
WEIGHTED-AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE
BASIC -GAAP (g) 42,915   41,893   42,706   41,780  
BASIC - Non-GAAP (h) 42,918   42,076   42,762   42,018  
 
DILUTED - GAAP (g) 45,039   43,431   45,052   43,819  
DILUTED - Non-GAAP (h) 46,022   43,666   45,485   44,176  
 

(a) Approximately $1,000 and $28,000 of undistributed earnings allocated to participating securities were not included in the determination of GAAP basic net income per common share for the three and six months ended December 31, 2013, respectively, and approximately $21,000 and $33,000 for the three and six months ended December 31, 2012, respectively.

(b) Approximately $1,000 and $26,000 of undistributed earnings allocated to participating securities were not included in the determination of GAAP diluted net income per common share for the three and six months ended December 31, 2013, respectively, and approximately $21,000 and $31,000 for the three and six months ended December 31, 2012, respectively.

(c) Amortization of ASC Topic 718 stock-based compensation for the three and six months ended December 31, 2013 and 2012.

(d) The provision of income taxes used in arriving at the non-GAAP net income was computed using an income tax rate of 30.5% and 31.0% for the three and six months ended December 31, 2013, respectively, and 24.6% and 26.6% for the three and six months ended December 31, 2012, respectively.

(e) Approximately $1,000 and $34,000 of undistributed earnings allocated to participating securities were included in the determination of Non-GAAP basic net income per common share for the three and six months ended December 31, 2013, respectively, and approximately $34,000 and $62,000 for the three and six months ended December 31, 2012, respectively.

(f) Approximately $1,000 and $32,000 of undistributed earnings allocated to participating securities were included in the determination of Non-GAAP diluted net income per common share for the three and six months ended December 31, 2013, respectively, and approximately $33,000 and $59,000 for the three and six months ended December 31, 2012, respectively.

(g) 2,739 and 56,043 shares of unvested restricted stock awards were not included in the determination of GAAP basic and diluted net income per common share for the three and six months ended December 31, 2013, respectively. 183,141 and 237,814 shares of unvested restricted stock awards were not included in the determination of GAAP basic and diluted net income per common share for the three and six months ended December 31, 2012, respectively.

(h) 2,739 and 56,043 shares of unvested restricted stock awards were included in the determination of Non-GAAP basic and diluted net income per common share for the three and six months ended December 31, 2013, respectively. 183,141 and 237,814 shares of unvested restricted stock awards were included in the determination of Non-GAAP basic and diluted net income per common share for the three and six months ended December 31, 2012, respectively.

SMCI-F

Super Micro Computer, Inc.
Howard Hideshima, 408-503-8000
Chief Financial Officer
ir@supermicro.com
or
Perry G. Hayes
SVP, Investor Relations
ir@supermicro.com

Source: Super Micro Computer, Inc.

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