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Supermicro Announces Second Quarter Fiscal 2020 Financial Results

02/06/2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 6, 2020-- Super Micro Computer, Inc. (Nasdaq: SMCI), a global leader in high-performance, high-efficiency server, storage technology and green computing, today announced financial results for its fiscal second quarter ended December 31, 2019.

Fiscal Second Quarter Highlights

  • Net sales of $870.9 million versus $799.8 million in the first quarter of fiscal year 2020 and $931.5 million in the same quarter of last year.
  • GAAP gross margin of 15.9% versus 16.4% in the first quarter of fiscal year 2020 and 13.7% in the same quarter of last year.
  • GAAP net income of $23.7 million versus $26.3 million in the first quarter of fiscal year 2020 and $18.2 million in the same quarter of last year.
  • GAAP fully diluted earnings per share of $0.46 versus $0.51 in the first quarter of fiscal year 2020 and $0.36 in the same quarter of last year.
  • Non-GAAP fully diluted earnings per share of $0.57 versus $0.68 in the first quarter of fiscal year 2020 and $0.66 in the same quarter of last year.
  • Cash flow from operations of $81.6 million and capital expenditures of $10.8 million.

Non-GAAP gross margin for the fiscal second quarter of 2020 was 15.9%, which excludes stock-based compensation expenses of $0.4 million. Non-GAAP fully diluted earnings per share was $0.57, which excludes stock-based compensation expenses of $5.0 million and consulting expenses related to regaining SEC compliance and other non-recurring expenses of $3.8 million less the related tax effects of both.

As of December 31, 2019, total cash, cash equivalents and short-term investments was $309.0 million and bank debt was $23.3 million.

“Over the last couple of years, Supermicro has been continuing our mission of becoming a strong global leader of server and storage solutions, especially the greenest and best TCO IT solutions. We have added many new product lines and dramatically increased our operational capacity worldwide. This quarter, our revenue exceeded the upper end of our original guidance which marks the beginning of our business reacceleration,” said Charles Liang, Chairman and Chief Executive Officer. “We are the only server and storage solution provider with more than half of our engineering, product development and final assembly based in the USA. Our engineering and R&D strengths allow us to quickly deliver the most advanced technology with the broadest range of server and storage products in our industry. We are very excited by our product solutions targeting Artificial Intelligence, 5G / Edge, and the evolving needs of the Enterprise, which offer our company a substantial growth opportunity in a $100B market.”

Third Quarter Fiscal 2020 Guidance

The Company expects net sales in a range of $770 million to $830 million for the third quarter of fiscal year 2020 ending March 31, 2020. The Company expects non-GAAP earnings per diluted share of approximately $0.35 to $0.55 for the third quarter.

The Company expects to incur additional charges of $35 million to $40 million, which will be one-time in nature, in the third or fourth fiscal quarter of 2020. These one-time charges will address residual clean-up matters from our extended black-out period and have not been included in the above guidance.

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 to, among other things, the guidance for the Company’s third quarter of fiscal year 2020, which ends March 31, 2020. 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, including: (i) our quarterly operating results may fluctuate, which could cause rapid declines in our stock price, (ii) as we increasingly target larger customers and larger sales opportunities, our customer base may become more concentrated, our cost of sales may increase, our margins may be lower and our sales may be less predictable, (iii) if we fail to meet publicly announced financial guidance or other expectations about our business, our stock could decline in value, (iv) the average sales prices for our server solutions could decline if customers do not continue to purchase our latest generation products or additional components, and (v) adverse economic conditions may harm our business. 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, particularly our Annual Report on Form 10-K for our fiscal year ended June 30, 2019.

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.

Use of Non-GAAP Financial Measures

Non-GAAP gross margin and fully diluted earnings per share discussed in this press release exclude as applicable stock-based compensation expenses, consulting expenses related to regaining SEC compliance and other non-recurring expenses described above, 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, the reconciliation between the Company's GAAP gross margin and non-GAAP gross margin is stock-based compensation of $0.4 million and the reconciliation between the Company’s GAAP fully diluted earnings per share and non-GAAP fully diluted earnings per share is stock-based compensation of $5.0 million, and consulting expenses related to regaining SEC compliance and other non-recurring expenses of $3.8 million less related tax effect of $2.0 million. Refer to the associated tables below for further information.

About Super Micro Computer, Inc.

Supermicro (Nasdaq: SMCI), the leading innovator in high-performance, high-efficiency server technology is a premier provider of advanced Server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and Embedded Systems worldwide. Supermicro is committed to protecting the environment through its “We Keep IT Green®” initiative and provides customers with the most energy-efficient, environmentally-friendly solutions available on the market.

Supermicro, Server 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,

 

 

2019

 

2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

309,038

 

 

$

248,164

 

Accounts receivable, net of allowances

 

360,172

 

 

393,624

 

Inventories

 

704,430

 

 

670,188

 

Prepaid expenses and other current assets

 

147,055

 

 

109,795

 

Total current assets

 

1,520,695

 

 

1,421,771

 

Investment in equity investee

 

1,060

 

 

1,701

 

Property, plant and equipment, net

 

220,551

 

 

207,337

 

Deferred income taxes, net

 

42,015

 

 

41,126

 

Other assets

 

22,718

 

 

10,659

 

Total assets

 

$

1,807,039

 

 

$

1,682,594

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

392,537

 

 

$

360,470

 

Accrued liabilities

 

137,365

 

 

114,678

 

Income taxes payable

 

3,529

 

 

13,021

 

Short-term debt

 

23,250

 

 

23,647

 

Deferred revenue

 

115,059

 

 

94,153

 

Total current liabilities

 

671,740

 

 

605,969

 

Deferred revenue, non-current

 

100,553

 

 

109,266

 

Other long-term liabilities

 

33,193

 

 

26,183

 

Total liabilities

 

805,486

 

 

741,418

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock and additional paid-in capital, $0.001 par value

 

 

 

 

Authorized shares: 100,000,000

 

 

 

 

Issued shares: 51,923,260 and 51,289,413 at December 31, 2019 and June 30, 2019, respectively

 

360,060

 

 

349,683

 

Treasury stock (at cost), 1,333,125 shares at December 31, 2019 and June 30, 2019, respectively

 

(20,491

)

 

(20,491

)

Accumulated other comprehensive loss

 

(135

)

 

(80

)

Retained earnings

 

661,954

 

 

611,903

 

Total Super Micro Computer, Inc. stockholders’ equity

 

1,001,388

 

 

941,015

 

Noncontrolling interest

 

165

 

 

161

 

Total stockholders’ equity

 

1,001,553

 

 

941,176

 

Total liabilities and stockholders’ equity

$

1,807,039

$

1,682,594

 
SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 (unaudited)

   

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Net sales

 

$

870,943

 

 

$

931,509

 

 

$

1,670,747

 

 

$

1,902,627

 

Cost of sales

 

732,539

 

 

803,587

 

 

1,401,414

 

 

1,651,466

 

Gross profit

 

138,404

 

 

127,922

 

 

269,333

 

 

251,161

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

55,572

 

 

45,924

 

 

105,144

 

 

88,918

 

Sales and marketing

 

21,977

 

 

19,677

 

 

42,171

 

 

37,969

 

General and administrative

 

33,040

 

 

36,580

 

 

61,338

 

 

70,040

 

Total operating expenses

 

110,589

 

 

102,181

 

 

208,653

 

 

196,927

 

Income from operations

 

27,815

 

 

25,741

 

 

60,680

 

 

54,234

 

Other (expenses) income, net

 

(416

)

 

624

 

 

1,173

 

 

793

 

Interest expense

 

(560

)

 

(1,831

)

 

(1,112

)

 

(4,209

)

Income before income tax provision

 

26,839

 

 

24,534

 

 

60,741

 

 

50,818

 

Income tax provision

 

(2,113

)

 

(4,520

)

 

(10,681

)

 

(10,043

)

Share of loss from equity investee, net of taxes

 

(1,020

)

 

(1,794

)

 

(9

)

 

(3,213

)

Net income

 

$

23,706

 

 

$

18,220

 

 

$

50,051

 

 

$

37,562

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.37

 

 

$

1.00

 

 

$

0.75

 

Diluted

 

$

0.46

 

 

$

0.36

 

 

$

0.97

 

 

$

0.73

 

Weighted-average shares used in calculation of net income per common share:

 

 

 

 

 

 

 

 

Basic

 

50,181

 

 

49,844

 

 

50,129

 

 

49,774

 

Diluted

 

52,009

 

 

50,810

 

 

51,758

 

 

51,508

 

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

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Cost of sales

 

$

384

 

 

$

428

 

 

$

779

 

 

$

866

 

Research and development

 

3,126

 

 

3,212

 

 

6,256

 

 

6,708

 

Sales and marketing

 

423

 

 

436

 

 

859

 

 

941

 

General and administrative

 

1,031

 

 

1,171

 

 

2,124

 

 

2,606

 

Stock-based compensation expense before taxes

$

4,964

$

5,247

$

10,018

$

11,121

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

 (unaudited)

   

 

 

Six Months Ended December 31,

 

 

2019

 

2018

Net cash provided by operating activities

 

$

87,153

 

 

$

81,102

 

Net cash used in investing activities

 

(23,339

)

 

(9,306

)

Net cash used in financing activities

 

(2,076

)

 

(69,324

)

Effect of exchange rate fluctuations on cash

 

175

 

 

(101)

 

Net increase in cash, cash equivalents and restricted cash

 

61,913

 

 

2,371

 

Cash, cash equivalents and restricted cash at the beginning of the period

 

262,140

 

 

120,382

 

Cash, cash equivalents and restricted cash at the end of the period

 

$

324,053

 

 

$

122,753

 

SUPER MICRO COMPUTER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except share and per share amounts)

 (unaudited)

   

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

GAAP GROSS PROFIT

 

$

138,404

 

 

$

127,922

 

 

$

269,333

 

 

$

251,161

 

Add back stock-based compensation

 

384

 

 

428

 

 

779

 

 

866

 

Non-GAAP GROSS PROFIT

 

$

138,788

 

 

$

128,350

 

 

$

270,112

 

 

$

252,027

 

 

 

 

 

 

 

 

 

 

GAAP GROSS MARGIN

 

15.9%

 

 

13.7%

 

 

16.1%

 

 

13.2%

 

Add back stock-based compensation

 

0.0%

 

 

0.1%

 

 

0.1%

 

 

0.0%

 

Non-GAAP GROSS MARGIN

 

15.9%

 

 

13.8%

 

 

16.2%

 

 

13.2%

 

 

 

 

 

 

 

 

 

 

GAAP INCOME FROM OPERATIONS

 

$

27,815

 

 

$

25,741

 

 

$

60,680

 

 

$

54,234

 

Add back stock-based compensation

 

4,964

 

 

5,247

 

 

10,018

 

 

11,121

 

Add back consulting and other non-recurring expenses

 

3,759

 

 

16,395

 

 

11,417

 

 

32,410

 

Non-GAAP INCOME FROM OPERATIONS

 

$

36,538

 

 

$

47,383

 

 

$

82,115

 

 

$

97,765

 

 

 

 

 

 

 

 

 

 

GAAP NET INCOME

 

$

23,706

 

 

$

18,220

 

 

$

50,051

 

 

$

37,562

 

Add back stock-based compensation

 

4,964

 

 

5,247

 

 

10,018

 

 

11,121

 

Add back consulting and other non-recurring expenses

 

3,759

 

 

16,395

 

 

11,417

 

 

32,410

 

Less adjustments to tax provision

 

(2,007

)

 

(5,120

)

 

(5,058

)

 

(10,299

)

Non-GAAP NET INCOME

 

$

30,422

 

 

$

34,742

 

 

$

66,428

 

 

$

70,794

 

 

 

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE - BASIC

 

$

0.47

 

 

$

0.37

 

 

$

1.00

 

 

$

0.75

 

Add back stock-based compensation, consulting, and adjustments to tax provision

 

0.14

 

 

0.33

 

 

0.33

 

 

0.67

 

Non-GAAP NET INCOME PER COMMON SHARE - BASIC

 

$

0.61

 

 

$

0.70

 

 

$

1.33

 

 

$

1.42

 

 

 

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE - DILUTED

 

$

0.46

 

 

$

0.36

 

 

$

0.97

 

 

$

0.73

 

Add back stock-based compensation, consulting, and adjustments to tax provision

 

0.11

 

 

0.30

 

 

0.28

 

 

0.61

 

Non-GAAP NET INCOME PER COMMON SHARE - DILUTED

 

$

0.57

 

 

$

0.66

 

 

$

1.25

 

 

$

1.34

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC - GAAP

 

50,181

 

 

49,844

 

 

50,129

 

 

49,774

 

BASIC - Non-GAAP

 

50,181

 

 

49,844

 

 

50,129

 

 

49,774

 

 

 

 

 

 

 

 

 

 

DILUTED - GAAP

 

52,009

 

 

50,810

 

 

51,758

 

 

51,508

 

DILUTED - Non-GAAP

53,572

52,398

53,350

53,002

 

 

Source: Super Micro Computer, Inc.

Investor Relations Contacts
Perry G. Hayes, SVP, Investor Relations
(408) 895-6570

James Kisner, Investor Relations
(669) 284-1259

email: ir@supermicro.com

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