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Super Micro Computer, Inc. Announces Second Quarter Fiscal 2009 Financial Results

01/28/2009

SAN JOSE, Calif., Jan 28, 2009 (BUSINESS WIRE) -- Super Micro Computer, Inc. (NASDAQ:SMCI), a leader in application optimized, high performance server solutions, today announced second quarter fiscal 2009 financial results for the quarter ended December 31, 2008.

Fiscal SecondQuarter Highlights

  • Quarterly net sales of $128.6 million, down 6.1% from the same quarter of last year and down 10.8% from the prior quarter.
  • GAAP net income of $5.3 million, down 30.9% from the same quarter of last year and down 25.5% from the prior quarter.
  • GAAP gross margin of 18.7%, compared with 19.9% in the same quarter of last year and 19.3% in the prior quarter.

Net sales for the second quarter fiscal 2009 ended December 31, 2008 totaled $128.6 million, down 6.1% from $136.9 million in the second quarter of fiscal 2008. No customer accounted for more than 10% of net sales during the quarter.

GAAP net income for the second quarter of fiscal year 2009 was $5.3 million or $0.14 per diluted share, a decrease of 30.9% from the net income of $7.7 million, or $0.20 per diluted share in the same period a year ago. Included in net income for the quarter was $1.3 million of stock-based compensation expense (pre-tax). Excluding stock-based compensation expense and the related tax effect, non-GAAP net income for the second quarter of fiscal 2009 was $6.7 million, or $0.17 per diluted share, compared to non-GAAP net income of $8.6 million, or $0.22 per diluted share, in the same quarter of last year. On a sequential basis, non-GAAP net income decreased from the first quarter of fiscal year 2009 by $1.6 million from $8.3 million and decreased by $0.04 from $0.21 per diluted share.

GAAP gross margin for the second quarter declined to 18.7%, compared to 19.9% in the same period a year ago. Non-GAAP gross margin for the second quarter was 18.9% compared to 20.0% in the same period a year ago. On a sequential basis, non-GAAP gross margin decreased by 0.5% from 19.4% in the first quarter of fiscal 2009.

6-Month Summary

Net sales for the six months ended December 31, 2008 were $272.6 million, up 7.0% from $254.9 million for the first six months of fiscal year 2008. Net income for the first six months of fiscal year 2009 was $12.5 million or $0.32 per diluted share, compared to $13.5 million or $0.35 per diluted share in the same period a year ago. Excluding stock based-compensation expense and related tax effect, non-GAAP net income for the first six months was $15.1 million or $0.38 per diluted share, compared to $15.2 million or $0.39 per diluted share in the same period a year ago.

The Company's cash and cash equivalents, short and long term investments at December 31, 2008 were $74.9 million compared to $67.6 million at June 30, 2008. Free cash flow in the six months ended December 31, 2008 was $7.5 million.

Management Commentary & Business Outlook

"We are operating in economic conditions that are much tougher than the world could have imagined at the beginning of this fiscal year. While the industry and competitors struggle this quarter, we continued to grow market share and we delivered a solid quarter of profitability. Additionally, we have begun to make necessary adjustments to our cost structure," said Charles Liang, President and Chief Executive Officer. "Supermicro's fundamentals are strong and we have an experienced management team to drive our excellent product strategy with an exciting portfolio of new products. We are as convinced as ever that Supermicro's ability to help our customers compete and grow by providing innovative, fast time-to-market and cost effective server solutions makes us one of the strongest competitors in the industry with over 15 years of consecutive profitability."

Current uncertainty in global economic conditions makes it more difficult to predict customer purchasing decisions and Supermicro's business outlook for the third quarter reflects the uncertainty in the demand cycle and timing of sales.

The Company expects net sales to decrease 9% to 16% for the third quarter of fiscal year 2009 ending March 31, 2009, compared to the third fiscal quarter of last year, which represents a range of $115 million to $125 million in net sales. In addition, the Company expects non-GAAP earnings per diluted share of approximately $0.11 to $0.14 for the third quarter.

It is currently expected that the outlook will not be updated until the release of 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. Those wishing to participate in the conference call should call 888-637-7738 (international callers dial 913-981-5536) 10 minutes prior to registering. A replay of the call will be available until 11:59 pm ET on Feb. 13, 2009 by dialing 888-203-1112 (international callers dial 719-457-0820) and entering replay PIN 2990334 The live web cast and replay of the call will be available on the Investor Relations section at www.supermicro.com, with the replay beginning approximately two hours after the conclusion of the call and will remain available until the Company's next earnings call. The call will be accompanied by a slide presentation which can be found on our website at www.supermicro.com in the investor section under Events and Presentations in a pdf format that can be downloaded.

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 Supermicro, 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: current economic conditions, 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.

Established in 1993, Supermicro emphasizes superior product design and uncompromising quality control to produce industry-leading serverboards, chassis and server systems. These mission-critical Server Building Block solutions provide benefits across many environments, including data center deployment, high-performance computing, high-end workstations, storage networks and standalone server installations. For more information on Supermicro's complete line of advanced motherboards, SuperServers, and optimized chassis, visit www.Supermicro.com, email Marketing@Supermicro.com or call the San Jose, CA headquarters at +1 408-503-8000.

SUPER MICRO COMPUTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
  December 31,   June 30,
  2008     2008  
ASSETS
Current assets:
Cash and cash equivalents $ 60,297 $ 51,481
Short-term investments 57 57
Accounts receivable, net 39,587 49,501
Inventories, net 89,142 85,683
Deferred income taxes - current 8,446 8,663
Prepaid income taxes 7,166 2,661
Prepaid expenses and other current assets   3,368     1,837  
Total current assets 208,063 199,883
Long-term investments 14,557 16,106
Property, plant and equipment, net 45,766 45,602
Deferred income taxes - noncurrent 1,299 939
Restricted assets 1,769 1,728
Other assets   125     127  
Total assets $ 271,579   $ 264,385  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,556 $ 80,962
Accrued liabilities 16,960 14,790
Income taxes payable 109 189
Advances from receivable financing arrangements 1,936 1,173
Current portion of capital lease obligations 41 57
Current portion of long-term debt   308     320  
Total current liabilities 84,910 97,491
 
Long-term capital lease obligations-net of current portion 86 108
Long-term debt-net of current portion 9,853 9,981
Other long-term liabilities   4,984     4,934  
Total liabilities 99,833 112,514
Stockholders' equity:
Common stock and additional paid-in capital 78,686 69,434
Deferred stock-based compensation (359 ) (675 )
Treasury stock (1,786 ) -
Accumulated other comprehensive loss (876 ) (451 )
Retained earnings   96,081     83,563  
Total stockholders' equity   171,746     151,871  
Total liabilities and stockholders' equity $ 271,579   $ 264,385  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
     
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
Net sales $ 128,565 $ 136,933 $ 272,616 $ 254,882
Cost of sales   104,473     109,678   220,688     204,582  
Gross profit 24,092 27,255 51,928 50,300
Operating expenses:
Research and development 8,961 6,987 17,046 13,693
Sales and marketing 4,292 4,560 9,048 8,289
General and administrative   3,565     3,472   6,720     6,896  
Total operating expenses 16,818 15,019 32,814 28,878
Income from operations 7,274 12,236 19,114 21,422
Interest income 154 454 372 992
Interest expense   (265 )   (248 ) (502 )   (500 )
Income before income tax provision 7,163 12,442 18,984 21,914
Income tax provision   1,817     4,702   6,466     8,367  
Net income $ 5,346   $ 7,740   $ 12,518   $ 13,547  
Net income per share:
Basic $ 0.16   $ 0.25   $ 0.37   $ 0.44  
Diluted $ 0.14   $ 0.20   $ 0.32   $ 0.35  
Shares used in per share calculation:
Basic   34,443,233     30,817,552   33,739,629     30,556,084  
Diluted   39,159,735     38,741,151   39,283,271     38,683,142  
 
 
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,
2008 2007 2008 2007
Cost of sales $ 143 $ 118 $ 276

$ 230

Research and development 645 406 1,196 755
Sales and marketing 197 148 388 292
General and administrative 351 266 685 531
SUPER MICRO COMPUTER, INC
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(In thousands)
(Unaudited)
Six Months Ended

December 31,

2008   2007
OPERATING ACTIVITIES:
Net income $ 12,518 $ 13,547
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 1,688 1,137
Stock-based compensation expense 2,545 1,808
Allowance for doubtful accounts 365 196
Allowance for sales returns 2,481 2,631
Provision for inventory 327 4,510
Loss on disposal of property and equipment 18 -
Deferred income taxes 131 (2,011 )
Gain on short-term investments - (418 )
Changes in operating assets and liabilities:
Accounts receivable, net 7,068 (15,175 )
Inventories (3,786 ) (30,403 )
Prepaid expenses and other current assets (1,531 ) (259 )
Other assets (1 ) 89
Accounts payable (14,756 ) 31,275
Income tax payable 703 2,121
Accrued liabilities 2,170 (1,039 )
Other long-term liabilities   50     2,944  
Net cash provided by operating activities   9,990     10,953  
INVESTING ACTIVITIES:
Proceeds from investments 850 17,480
Purchases of investments - (21,375 )
Purchases of property, plant and equipment (2,517 ) (12,550 )
Restricted assets   (41 )   (4 )
Net cash used in investing activities   (1,708 )   (16,449 )
FINANCING ACTIVITIES:
Repayment of long-term debt (140 ) (1,107 )
Proceeds from exercise of stock options 1,735 1,320
Payment of obligations under capital leases (38 ) (75 )
Advances under receivable financing arrangements 763 (86 )
Payment to acquire treasury stock (1,786 ) -
Payment of offering costs   -     (20 )
Net cash provided by financing activities   534     32  
Net increase (decrease) in cash and cash equivalents 8,816 (5,464 )
Cash and cash equivalents at beginning of period   51,481     50,864  
Cash and cash equivalents at end of period $ 60,297   $ 45,400  
Supplemental disclosure of cash flow information:
Cash paid for interest 502 500
Cash paid for taxes 5,182 5,054
Non-cash investing and financing activities:
Equipment purchased under capital leases - 4
Reversals of deferred stock-based compensation for cancellation of stock options 3 21
Accrued costs for property, plant and equipment purchases 313 1,886
Accrued offering costs - 20
Changes in fair values of investments (699 ) -
SUPER MICRO COMPUTER, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except share and per share amounts)
(Unaudited)
       
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
GAAP GROSS PROFIT $ 24,092 $ 27,255 $ 51,928 $ 50,300
Add back stock-based compensation (a)   143     118     276     230  
Non-GAAP GROSS PROFIT $ 24,235   $ 27,373   $ 52,204   $ 50,530  
 
GAAP GROSS MARGIN 18.7 % 19.9 % 19.0 % 19.7 %
Add back stock-based compensation (a)   0.2 %   0.1 %   0.1 %   0.1 %
Non-GAAP GROSS MARGIN   18.9 %   20.0 %   19.1 %   19.8 %
 
GAAP INCOME FROM OPERATIONS $ 7,274 $ 12,236 $ 19,114 $ 21,422
Add back stock-based compensation (a)   1,336     938     2,545     1,808  
Non-GAAP INCOME FROM OPERATIONS $ 8,610   $ 13,174   $ 21,659   $ 23,230  
 
GAAP NET INCOME $ 5,346 $ 7,740 $ 12,518 $ 13,547
Add back stock-based compensation (a) 1,336 938 2,545 1,808
Add back adjustments to tax provision (b)   46     (120 )   (6 )   (168 )
Non-GAAP NET INCOME $ 6,728   $ 8,558   $ 15,057   $ 15,187  
 
GAAP NET INCOME PER SHARE - BASIC $ 0.16 $ 0.25 $ 0.37 $ 0.44
Add back stock-based compensation and adjustments to tax provision (a) (b)   0.04     0.03     0.08     0.06  
Non-GAAP NET INCOME PER SHARE - BASIC $ 0.20   $ 0.28   $ 0.45   $ 0.50  
 
 
GAAP NET INCOME PER SHARE - DILUTED $ 0.14 $ 0.20 $ 0.32 $ 0.35
Add back stock-based compensation and adjustments to tax provision (a) (b)   0.03     0.02     0.06     0.04  
Non-GAAP NET INCOME PER SHARE - DILUTED $ 0.17   $ 0.22   $ 0.38   $ 0.39  
 
SHARES USED IN COMPUTING NET INCOME PER SHARE
BASIC -GAAP   34,443,233     30,817,552     33,739,629     30,556,084  
BASIC - Non-GAAP   34,443,233     30,817,552     33,739,629     30,556,084  
 
DILUTED - GAAP   39,159,735     38,741,151     39,283,271     38,683,142  
DILUTED - Non-GAAP   39,233,814     38,942,446     39,426,695     38,899,565  
 
 

(a) Amortization of SFAS No. 123R, APB 25 and SFAS No. 123 stock-based compensation for the three and six months ended December 31, 2008 and 2007.

(b) The provision of income taxes used in arriving at the non-GAAP net income was computed using an income tax rate of 20.8% and 36.0% for the three months ended December 31, 2008 and 2007, respectively and 30.1% and 36.0% for the six months ended December 31, 2008 and 2007, respectively.

SMCI-F

SOURCE: Super Micro Computer, Inc.

Super Micro Computer, Inc.
Howard Hideshima, 408-503-8000
Chief Financial Officer
ir@supermicro.com
or
Perry G. Hayes, 408-895-6570
SVP, Investor Relations
ir@supermicro.com

Copyright Business Wire 2009

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