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Supermicro Announces First Quarter Fiscal Year 2023 Financial Results

11/01/2022

Supermicro (Nasdaq: SMCI), a Total IT Solution Provider for Cloud, AI/ML, Storage, and 5G/Edge, today announced financial results for its first quarter of fiscal year 2023 ended September 30, 2022.

First Quarter Fiscal Year 2023 Highlights

  • Net sales of $1.85 billion versus $1.64 billion in the fourth quarter of fiscal year 2022 and $1.03 billion in the same quarter of last year.
  • Gross margin of 18.8% versus 17.6% in the fourth quarter of fiscal year 2022 and 13.4% in the same quarter of last year.
  • Net income of $184 million versus $141 million in the fourth quarter of fiscal year 2022 and $25 million in the same quarter of last year.
  • Diluted net income per common share of $3.35 versus $2.60 in the fourth quarter of fiscal year 2022 and $0.48 in the same quarter of last year.
  • Non-GAAP diluted net income per common share of $3.42 versus $2.62 in the fourth quarter of fiscal year 2022 and $0.58 in the same quarter of last year.
  • Cash flow provided by operations for the first quarter of fiscal year 2023 of $314 million and capital expenditures of $11 million.

Non-GAAP gross margin for the first quarter of fiscal year 2023 was 18.8%. Non-GAAP diluted net income per common share for the first quarter of fiscal year 2023 was $3.42, which adds back stock-based compensation expenses of $7.8 million, net of the related tax effects.

As of September 30, 2022, total cash and cash equivalents was $238 million and total bank debt was $250 million.

“In Q1 fiscal 2023, our revenue reached a record $1.85 billion dollars, which makes it our 7th consecutive quarter of accelerating YoY growth,” said Charles Liang, Chairman and CEO, Supermicro. “The 79% YoY quarterly growth is about ten times faster than the current industry average. It proves that our Green Computing and Total IT Solutions continue to gain customers’ acceptance and trust. We recognize the opportunities being driven by more demanding compute, storage, telco and AI workloads. Our new generation of products based on optimized system building blocks is the foundation behind our strong, continued growth going forward.”

Business Outlook and Management Commentary

For the second quarter of fiscal year 2023 ending December 31, 2022, the Company expects net sales of $1.7 billion to $1.8 billion, GAAP net income per diluted share of $2.54 to $2.81 and non-GAAP net income per diluted share of $2.64 to $2.90. The Company’s projections for GAAP and non-GAAP net income per diluted share assume a tax rate of approximately 17.4% and 19.4%, respectively, and a fully diluted share count of 55.7 million shares for GAAP and fully diluted share count of 57.0 million shares for non-GAAP. The outlook for Q2 of fiscal year 2023 GAAP net income per diluted share includes approximately $11.8 million in expected stock-based compensation expense.

For fiscal year 2023 ending June 30, 2023, the Company raises its guidance for net sales from a range of $6.2 billion to $7.0 billion to $6.5 billion to $7.5 billion, GAAP net income per diluted share from at least $7.27 to a range of $8.50 to $11.00, and non-GAAP net income per diluted share from at least $7.50 to a range of $9.00 to $11.30. The Company’s projections for annual GAAP and non-GAAP net income per diluted share assume a tax rate of approximately 19.2% and 19.8%, respectively, and a fully diluted share count of 57.0 million shares for GAAP and fully diluted share count of 58.4 million shares for non-GAAP. The outlook for fiscal year 2023 GAAP net income per diluted share includes approximately $32.7 million in expected stock-based compensation and other expenses, net of related tax effects that are excluded from non-GAAP net income per diluted share.

Conference Call and Webcast Information

Supermicro will hold a public webcast at 2:00 p.m. PDT today to discuss the results for its first quarter of fiscal year 2023.

Those wishing to access the live webcast may use the following link: https://events.q4inc.com/attendee/707364803

The conference call can be accessed by registering online at: https://conferencingportals.com/event/fIceWmPv

After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes for entry. Registration is open during the live call, but to ensure connectivity for the full call, it is recommended that participants register a day in advance and dial-in for the call at least 10 minutes before the start of the call.

A replay of the webcast will be available shortly after the call on the Company’s investor relations website (https://ir.supermicro.com) and will remain accessible for one year.

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 second quarter of fiscal year 2023 and full year fiscal 2023 guidance, Green Computing and Total IT Solutions gaining customers’ acceptance and trust, the drivers for the Company’s opportunities, and the ability of the Company’s new generation of products to be the foundations to growth going forward. 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) the global COVID-19 pandemic continues to present significant uncertainties for all parts of our business including our supply chain, our production operations and customer demand, (ii) our quarterly operating results may fluctuate, which could cause rapid declines in our stock price, (iii) 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, (iv) if we fail to meet publicly announced financial guidance or other expectations about our business, our stock could decline in value, (v) 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 (vi) 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 in our Annual Report on Form 10-K for our fiscal year ended June 30, 2022, and Quarterly Reports on Form 10-Q filed thereafter.

Use of Non-GAAP Financial Measures

Non-GAAP gross margin discussed in this press release adds back stock-based compensation expenses and other expenses. Non-GAAP diluted net income per common share discussed in this press release adds back stock-based compensation expenses, special performance bonuses, litigation and controls remediation expense and other expenses, adjusted for the related tax effects. 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. A reconciliation of gross margin to non-GAAP gross margin and from diluted net income per common share to non-GAAP diluted net income per common share is included in the tables below.

About Super Micro Computer, Inc.

Supermicro (NASDAQ: SMCI) is a global leader in Application-Optimized Total IT Solutions. Founded and operating in San Jose, California, Supermicro is committed to delivering first to market innovation for Enterprise, Cloud, AI and 5G Telco/Edge IT Infrastructure. We are transforming to being a Total IT Solutions provider with server, AI, storage, IoT and switch systems, software and services while continuing to deliver advanced high-volume motherboard, power and chassis products. The products are designed and manufactured in-house (in US, Taiwan and Netherlands) leveraging global operations for scale and efficiency and optimized to improve TCO and reduce environmental impact (Green Computing). The award-winning portfolio of Server Building Block Solutions® allows customers to optimize for their exact workload and application by selecting from a broad family of systems built from our flexible and reusable building blocks that support a comprehensive set of form factors, processors, memory, GPUs, storage, networking, power and cooling solutions (air conditioned, free air cooling or liquid cooling).

Supermicro, Server Building Block Solutions, and We Keep IT Green are trademarks and/or registered trademarks of Super Micro Computer, Inc.

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

September 30,

 

June 30,

 

 

2022

 

 

2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

238,268

 

$

267,397

Accounts receivable, net of allowance for credit losses

 

736,312

 

 

834,513

Inventories

 

1,736,055

 

 

1,545,606

Prepaid expenses and other current assets

 

169,245

 

 

158,799

Total current assets

 

2,879,880

 

 

2,806,315

Investment in equity investee

 

4,352

 

 

5,329

Property, plant and equipment, net

 

290,752

 

 

285,972

Deferred income taxes, net

 

89,155

 

 

69,929

Other assets

 

37,144

 

 

37,532

Total assets

$

3,301,283

 

$

3,205,077

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

785,025

 

$

655,403

Accrued liabilities

 

213,521

 

 

212,419

Income taxes payable

 

68,411

 

 

41,743

Short-term debt

 

101,173

 

 

449,146

Deferred revenue

 

185,225

 

 

111,313

Total current liabilities

 

1,353,355

 

 

1,470,024

Deferred revenue, non-current

 

134,625

 

 

122,548

Long-term debt

 

148,551

 

 

147,618

Other long-term liabilities

 

39,549

 

 

39,140

Total liabilities

 

1,676,080

 

 

1,779,330

Stockholders’ equity:

 

 

 

Common stock and additional paid-in capital

 

497,183

 

 

481,741

Accumulated other comprehensive income

 

514

 

 

911

Retained earnings

 

1,127,339

 

 

942,923

Total Super Micro Computer, Inc. stockholders’ equity

 

1,625,036

 

 

1,425,575

Noncontrolling interest

 

167

 

 

172

Total stockholders’ equity

 

1,625,203

 

 

1,425,747

Total liabilities and stockholders’ equity

$

3,301,283

 

$

3,205,077

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)

 

 

Three Months Ended
September 30,

 

 

2022

 

 

 

2021

 

Net sales

$

1,852,130

 

 

$

1,032,730

 

Cost of sales

 

1,504,595

 

 

 

894,591

 

Gross profit

 

347,535

 

 

 

138,139

 

Operating expenses:

 

 

 

Research and development

 

74,243

 

 

 

65,143

 

Sales and marketing

 

29,363

 

 

 

21,624

 

General and administrative

 

23,806

 

 

 

22,244

 

Total operating expenses

 

127,412

 

 

 

109,011

 

Income from operations

 

220,123

 

 

 

29,128

 

Other income, net

 

8,054

 

 

 

50

 

Interest expense

 

(3,938

)

 

 

(804

)

Income before income tax provision

 

224,239

 

 

 

28,374

 

Income tax (provision)

 

(38,934

)

 

 

(3,325

)

Share of (loss) income from equity investee, net of taxes

 

(889

)

 

 

388

 

Net income

$

184,416

 

 

$

25,437

 

Net income per common share:

 

 

 

Basic

$

3.51

 

 

$

0.50

 

Diluted

$

3.35

 

 

$

0.48

 

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

 

 

 

Basic

 

52,598

 

 

 

50,796

 

Diluted

 

55,017

 

 

 

52,916

 

 

 

 

 

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

 

Three Months Ended
September 30,

 

 

2022

 

 

2021

Cost of sales

$

884

 

$

447

Research and development

 

6,118

 

 

3,880

Sales and marketing

 

809

 

 

517

General and administrative

 

3,203

 

 

2,171

Stock-based compensation expense

$

11,014

 

$

7,015

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

(unaudited)

 

 

Three Months Ended
September 30,

 

 

2022

 

 

 

2021

 

Net cash provided by (used in) operating activities

$

313,587

 

 

$

(134,571

)

Net cash (used in) investing activities

 

(10,746

)

 

 

(11,902

)

Net cash (used in) provided by financing activities

 

(331,183

)

 

 

184,262

 

Effect of exchange rate fluctuations on cash

 

(1,472

)

 

 

(11

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(29,813

)

 

 

37,778

 

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

 

268,559

 

 

 

233,449

 

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

$

238,746

 

 

$

271,227

 

SUPER MICRO COMPUTER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands except per share amounts)

(unaudited)

 

 

Three Months Ended

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

GAAP GROSS PROFIT

$

347,535

 

 

$

287,344

 

 

$

138,139

 

Stock-based compensation

 

884

 

 

 

498

 

 

 

447

 

Other expenses

 

 

 

 

 

 

 

295

 

NON-GAAP GROSS PROFIT

$

348,419

 

 

$

287,842

 

 

$

138,881

 

 

 

 

 

 

 

GAAP GROSS MARGIN

 

18.8

%

 

 

17.6

%

 

 

13.4

%

Stock-based compensation

 

0.0

%

 

 

0.0

%

 

 

0.0

%

Other expenses

 

%

 

 

%

 

0.0%.

NON-GAAP GROSS MARGIN

 

18.8

%

 

 

17.6

%

 

 

13.4

%

 

 

 

 

 

 

GAAP OPERATING EXPENSE

$

127,412

 

 

$

122,131

 

 

$

109,011

 

Stock-based compensation

 

(10,130

)

 

 

(8,386

)

 

 

(6,568

)

Special performance bonuses

 

 

 

 

 

 

 

(158

)

Litigation and controls remediation expenses

 

 

 

 

(234

)

 

 

(1,326

)

NON-GAAP OPERATING EXPENSE

$

117,282

 

 

$

113,511

 

 

$

100,959

 

 

 

 

 

 

 

GAAP INCOME FROM OPERATIONS

$

220,123

 

 

$

165,213

 

 

$

29,128

 

Stock-based compensation

 

11,014

 

 

 

8,884

 

 

 

7,015

 

Special performance bonuses

 

 

 

 

 

 

 

453

 

Litigation and controls remediation expenses

 

 

 

 

234

 

 

 

1,326

 

NON-GAAP INCOME FROM OPERATIONS

$

231,137

 

 

$

174,331

 

 

$

37,922

 

 

 

 

 

 

 

GAAP OPERATING MARGIN

 

11.9

%

 

 

10.1

%

 

 

2.8

%

Stock-based compensation

 

0.6

%

 

 

0.6

%

 

 

0.7

%

Special performance bonuses

 

%

 

 

%

 

 

0.1

%

Litigation and controls remediation expenses

 

%

 

 

0.0

%

 

 

0.1

%

NON-GAAP OPERATING MARGIN

 

12.5

%

 

 

10.7

%

 

 

3.7

%

 

 

 

 

 

 

GAAP TAX EXPENSE

$

38,934

 

 

$

25,760

 

 

$

3,325

 

Adjustments to tax provision

 

3,230

 

 

 

4,137

 

 

 

2,830

 

NON-GAAP TAX EXPENSE

$

42,164

 

 

$

29,897

 

 

$

6,155

 

 

 

 

 

 

 

GAAP NET INCOME

$

184,416

 

 

$

140,822

 

 

$

25,437

 

Stock-based compensation

 

11,014

 

 

 

8,884

 

 

 

7,015

 

Special performance bonuses

 

 

 

 

 

 

 

453

 

Litigation and controls remediation expenses

 

 

 

 

234

 

 

 

1,326

 

Adjustments to tax provision

 

(3,230

)

 

 

(4,137

)

 

 

(2,830

)

NON-GAAP NET INCOME

$

192,200

 

 

$

145,803

 

 

$

31,401

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – BASIC

$

3.51

 

 

$

2.70

 

 

$

0.50

 

Impact of Non-GAAP adjustments

 

0.14

 

 

 

0.10

 

 

 

0.12

 

NON-GAAP NET INCOME PER COMMON SHARE – BASIC

$

3.65

 

 

$

2.80

 

 

$

0.62

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – DILUTED

$

3.35

 

 

$

2.60

 

 

$

0.48

 

Impact of Non-GAAP adjustments

 

0.07

 

 

 

0.02

 

 

 

0.10

 

NON-GAAP NET INCOME PER COMMON SHARE – DILUTED

$

3.42

 

 

$

2.62

 

 

$

0.58

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

BASIC – GAAP

 

52,598

 

 

 

52,111

 

 

 

50,796

 

BASIC – NON-GAAP

 

52,598

 

 

 

52,111

 

 

 

50,796

 

 

 

 

 

 

 

DILUTED – GAAP

 

55,017

 

 

 

54,260

 

 

 

52,916

 

DILUTED – NON-GAAP

 

56,271

 

 

 

55,611

 

 

 

54,363

 

 

Investor Relations Contact
Nicole Noutsios
ir@supermicro.com

Source: Super Micro Computer, Inc.

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