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Super Micro Computer, Inc. Announces 1st Quarter 2016 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Super Micro Computer, Inc. (NASDAQ:SMCI), a global leader in high-performance, high-efficiency server, storage technology and green computing, today announced first quarter fiscal 2016 financial results for the quarter ended September 30, 2015. The final results are in line with the preliminary results announced by the Company on October 8, 2015.

Fiscal 1st Quarter Highlights

Net sales for the first quarter ended September 30, 2015 totaled $530.2 million, down 7.6% from $573.6 million in the fourth quarter of fiscal year 2015. One customer accounted for 11.9% of net sales during the quarter ended September 30, 2015.

GAAP net income for the first quarter of fiscal year 2016 was $20.5 million or $0.40 per diluted share, a decrease of 1.8% from net income of $20.9 million, or $0.42 per diluted share in the same period a year ago. Included in net income for the quarter is $3.9 million of stock-based compensation expense (pre-tax). Excluding this item and the related tax effect, non-GAAP net income for the first quarter was $23.4 million, or $0.45 per diluted share, compared to non-GAAP net income of $23.2 million, or $0.46 per diluted share, in the same quarter of the prior year. On a sequential basis, non-GAAP net income decreased from the fourth quarter of fiscal year 2015 by $6.6 million or $0.12 per diluted share.

GAAP gross margin was 15.6% for the first quarter of fiscal year 2016, the fourth quarter of fiscal year 2015 and the same period a year ago. Non-GAAP gross margin was 15.7% for the first quarter of fiscal year 2016, the fourth quarter of fiscal year 2015 and the same period a year ago.

The GAAP income tax provision was $11.3 million or 35.6% of income before tax provision compared to $10.6 million or 33.7% in the same period a year ago and $13.8 million or 34.1% in the fourth quarter of fiscal year 2015.

The Company's cash and cash equivalents and short and long term investments at September 30, 2015 were $113.6 million compared to $98.1 million at June 30, 2015. Free cash flow for the three months ended September 30, 2015 was $12.6 million, primarily due to an increase in the Company's cash provided by operating activities and partially offset by the cash used in the development and construction of improvements on the Company's property.

Business Outlook & Management Commentary

The Company expects net sales of $580 million to $630 million for the second quarter of fiscal year 2016 ending December 31, 2015. The Company expects non-GAAP earnings per diluted share of approximately $0.54 to $0.64 for the second quarter.

"As previously disclosed, first quarter revenue was lower than expected due to stronger seasonal effects combined with customer push outs and weaker European and Asia business activity. Nonetheless, with 19.6% growth in a seasonally weak quarter, we are off to a strong start to fiscal 2016. Our growth strategy for 2016 will be to continue to introduce new technologies such as NVMe and all flash storage array to evolve and grow key business verticals in Storage, Cloud/Internet Datacenter, HPC, Embedded and Enterprise," said Charles Liang, Chairman and Chief Executive Officer. "With our system management software, onsite service and system solution capacity are fully ready for the worldwide market, we expect to continue our strong growth with over 20% revenue growth for fiscal 2016."

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, please call 1-888-401-4668 (International callers dial 1-719-325-2464) 10 minutes prior. A recording of the conference will be available until 11:59 p.m. (Eastern Time) on Thursday, November 5, 2015, by dialing 1-877-870-5176 (International callers dial 1-858-384-5517) and entering replay PIN 9354543. 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 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, UltraTwin, TwinPro, 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)
      September 30,   June 30,
2015 2015
ASSETS
Current assets:
Cash and cash equivalents $ 110,894 $ 95,442
Accounts receivable, net 297,078 322,594
Inventory 461,371 463,493
Deferred income taxes - current 18,712 17,863
Prepaid income taxes 2,391 7,507
Prepaid expenses and other current assets 7,796   7,516  
Total current assets 898,242 914,415
Long-term investments 2,633 2,633
Property, plant and equipment, net 169,149 163,038
Deferred income taxes - noncurrent 5,816 4,497
Other assets 6,147   5,226  
Total assets $ 1,081,987   $ 1,089,809  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 263,223 $ 299,774
Accrued liabilities 46,967 46,743
Income taxes payable 14,866 14,111
Short-term debt and current portion of long-term debt 94,574   93,479  
Total current liabilities 419,630 454,107
Long term debt-net of current portion 233 933
Other long-term liabilities 17,215   15,684  
Total liabilities 437,078 470,724
Stockholders' equity:
Common stock and additional paid-in capital 252,426 247,081
Treasury stock (at cost) (2,030 ) (2,030 )
Accumulated other comprehensive loss (98 ) (80 )
Retained earnings 394,444   373,950  
Total Super Micro Computer Inc. stockholders' equity 644,742 618,921
Noncontrolling interest 167   164  
Total stockholders' equity 644,909   619,085  
Total liabilities and stockholders' equity $ 1,081,987   $ 1,089,809  
 
 
SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
     

Three Months Ended
September 30,

2015 2014
Net sales $ 530,235 $ 443,322
Cost of sales 447,403   374,129  
Gross profit 82,832 69,193
Operating expenses:
Research and development 28,326 21,509
Sales and marketing 14,249 11,002
General and administrative 8,200   5,056  
Total operating expenses 50,775   37,567  
Income from operations 32,057 31,626
Interest and other income, net 87 35
Interest expense (324 ) (196 )
Income before income tax provision 31,820 31,465
Income tax provision 11,326   10,602  
Net income $ 20,494   $ 20,863  
Net income per common share:
Basic $ 0.43   $ 0.46  
Diluted $ 0.40   $ 0.42  
Weighted-average shares used in calculation of net income per common share:
Basic (a) 47,517   45,473  
Diluted (b) 51,352   49,687  
 
 
Stock-based compensation is included in the following cost and expense categories by period (in thousands):
 

Three Months Ended
September 30,

2015 2014
Cost of sales $ 240 $ 207
Research and development 2,402 1,896
Sales and marketing 404 365
General and administrative 830 512
 
 
SUPER MICRO COMPUTER, INC
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(In thousands)
(Unaudited)
   

Three Months Ended
September 30,

2015   2014
OPERATING ACTIVITIES:
Net income $ 20,494 $ 20,863
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 2,753 1,847
Stock-based compensation expense 3,876 2,980
Excess tax benefits from stock-based compensation (134 ) (705 )
Allowance for doubtful accounts 98 (54 )
Provision for inventory 1,718 1,660
Exchange gain (2,007 ) (235 )
Deferred income taxes, net (2,221 ) 973
Changes in operating assets and liabilities:
Accounts receivable, net 25,418 18,422
Inventory 404 (27,364 )
Prepaid expenses and other assets (1,247 ) 1,547
Accounts payable (37,652 ) 2,131
Income taxes payable, net 6,787 6,726
Accrued liabilities 484 (1,903 )
Other long-term liabilities 1,535   158  
Net cash provided by operating activities 20,306   27,046  
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,662 ) (2,766 )
Restricted cash (3 ) 10  
Net cash used in investing activities (7,665 ) (2,756 )
 
FINANCING ACTIVITIES:
Proceeds from debt 4,700
Repayment of debt (2,900 ) (8,500 )
Proceeds from exercise of stock options 951 4,485
Excess tax benefits from stock-based compensation 134 705
Payment of obligations under capital leases (39 ) (28 )
Payments under receivable financing arrangements (37 ) (4 )
Minimum tax withholding paid on behalf of employees for restricted stock awards (196 )  
Net cash provided by (used in) financing activities 2,613   (3,342 )
Effect of exchange rate fluctuations on cash 198 (308 )
Net increase in cash and cash equivalents 15,452 20,640
Cash and cash equivalents at beginning of period 95,442   96,872  
Cash and cash equivalents at end of period 110,894   117,512  
Supplemental disclosure of cash flow information:
Cash paid for interest 298 202
Cash paid for taxes, net of refunds 5,736 3,123
Non-cash investing and financing activities:
Equipment purchased under capital leases 42 256
Accrued costs for property, plant and equipment purchases 5,735 2,976
 
 
SUPER MICRO COMPUTER, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
       

Three Months Ended
September 30,

2015 2014
GAAP GROSS PROFIT $ 82,832 $ 69,193
Add back stock-based compensation (a) 240   207  
Non-GAAP GROSS PROFIT $ 83,072   $ 69,400  
 
GAAP GROSS MARGIN 15.6 % 15.6 %
Add back stock-based compensation (a) 0.1 % 0.1 %
Non-GAAP GROSS MARGIN 15.7 % 15.7 %
 
GAAP INCOME FROM OPERATIONS $ 32,057 $ 31,626
Add back stock-based compensation (a) 3,876   2,980  
Non-GAAP INCOME FROM OPERATIONS $ 35,933   $ 34,606  
 
GAAP NET INCOME $ 20,494 $ 20,863
Add back stock-based compensation (a) 3,876 2,980
Add back adjustments to tax provision (b) (948 ) (658 )
Non-GAAP NET INCOME $ 23,422   $ 23,185  
 
GAAP NET INCOME PER COMMON SHARE - BASIC $ 0.43 $ 0.46
Add back stock-based compensation and adjustments to tax provision (a) (b) 0.06   0.05  
Non-GAAP NET INCOME PER COMMON SHARE - BASIC $ 0.49   $ 0.51  
 
GAAP NET INCOME PER COMMON SHARE - DILUTED $ 0.40 $ 0.42
Add back stock-based compensation and adjustments to tax provision (a) (b) 0.05   0.04  
Non-GAAP NET INCOME PER COMMON SHARE - DILUTED $ 0.45   $ 0.46  
 
WEIGHTED-AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE
BASIC -GAAP 47,517   45,473  
BASIC - Non-GAAP 47,517   45,473  
 
DILUTED - GAAP 51,352   49,687  
DILUTED - Non-GAAP 52,042   50,305  
 

(a) Amortization of ASC Topic 718 stock-based compensation for the three months ended September 30, 2015 and 2014.

(b) The provision of income taxes used in arriving at the non-GAAP net income was computed using an income tax rate of 34.4% and 32.7% for the three months ended September 30, 2015 and 2014, respectively.

SMCI-F

Super Micro Computer, Inc.
Howard Hideshima, 408-503-8000
SVP, 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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