Supermicro Announces Third Quarter Fiscal Year 2020 Financial Results

SAN JOSE, Calif. -- May 7, 2020 (BUSINESS WIRE) -- 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 third quarter of fiscal year 2020 ended March 31, 2020.

Third Quarter Fiscal Year 2020 Highlights

  • Net sales of $772 million versus $871 million in the second quarter of fiscal year 2020 and $744 million in the same quarter of last year.
  • Gross margin of 17.3% versus 15.9% in the second quarter of fiscal year 2020 and 15.1% in the same quarter of last year.
  • Net income of $16 million versus $24 million in the second quarter of fiscal year 2020 and $11 million in the same quarter of last year.
  • Diluted net income per common share of $0.29 versus $0.46 in the second quarter of fiscal year 2020 and $0.21 in the same quarter of last year.
  • Non-GAAP diluted net income per common share of $0.84 versus $0.57 in the second quarter of fiscal year 2020 and $0.49 in the same quarter of last year.
  • Cash flow used in operations of $21 million and capital expenditures of $11 million.

Income from operations in the third quarter of fiscal year 2020 benefited by a $10.1 million settlement fee related to a joint product development agreement. After the related tax effect, GAAP and non-GAAP net income per common share on a diluted basis benefited by $0.14.

Non-GAAP gross margin for the third quarter of fiscal year 2020 was 17.7%, which adds back stock-based compensation expenses of $0.4 million and one-time employee performance bonuses of $2.9 million. Non-GAAP diluted net income per common share for the third quarter of fiscal year 2020 was $0.84, which adds back stock-based compensation expenses of $4.8 million, one-time employee performance bonuses of $10.3 million, legal settlement costs of $17.5 million, and other non recurring expenses of $1.4 million less the related tax effects.

As of March 31, 2020, total cash, cash equivalents and restricted cash was $319 million and bank debt was $33 million.

“We were pleased to deliver Q3 revenue that grew 4% year-over-year despite the disruptions to our operations from the impact of COVID-19," said Charles Liang, Chairman and CEO. "Our highest priority remains the health and security of our employees, customers and partners, and I want to personally thank them all for their perseverance during this challenging time. While the business environment remains dynamic, we remain focused on our longer-term priorities and helping our customers capitalize on rapidly growing applications such as Artificial Intelligence, 5G / Edge, and Cloud, the adoption of all which is accelerating as a result of the global pandemic. Our pipeline of innovation is more vibrant than ever with new server products leveraging the latest generation of Xeon processors from Intel and EPYC processors from AMD, Outdoor Edge systems for 5G, and high-volume, cost-effective systems for large Data Center operators. Supermicro remains ready and eager to help its customers meet their evolving strategic priorities, whatever challenges may come."

Fourth Quarter Fiscal Year 2020 Guidance

Given the uncertainties related to COVID-19, Supermicro will not provide guidance for the fourth quarter of fiscal year 2020.

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 ability to execute on the company strategy during the global COVID-19 pandemic. 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, 2019 and our Quarterly Report on Form 10-Q for our quarterly period ended December 31, 2019.

Use of Non-GAAP Financial Measures

Non-GAAP gross margin discussed in this press release adds back stock-based compensation expenses and one-time employee performance bonuses. Non-GAAP diluted net income per common share discussed in this press release adds back stock-based compensation expenses, one-time employee performance bonuses, legal settlement costs, other non-recurring expenses, and the related tax effects 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. 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), 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, 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.

Investor Relations Contact
James Kisner, Investor Relations
(669) 284-1259

email: ir@supermicro.com

 

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 (unaudited)

 

 

March 31,

 

June 30,

 

2020

 

2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

300,859

 

 

$

248,164

 

Accounts receivable, net of allowances

333,172

 

 

393,624

 

Inventories

866,226

 

 

670,188

 

Prepaid expenses and other current assets

148,102

 

 

109,795

 

Total current assets

1,648,359

 

 

1,421,771

 

Investment in equity investee

—

 

 

1,701

 

Property, plant and equipment, net

230,477

 

 

207,337

 

Deferred income taxes, net

45,562

 

 

41,126

 

Other assets

35,838

 

 

10,659

 

Total assets

$

1,960,236

 

 

$

1,682,594

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

462,808

 

 

$

360,470

 

Accrued liabilities

177,148

 

 

114,678

 

Income taxes payable

1,979

 

 

13,021

 

Short-term debt

33,158

 

 

23,647

 

Deferred revenue

109,730

 

 

94,153

 

Total current liabilities

784,823

 

 

605,969

 

Deferred revenue, non-current

95,752

 

 

109,266

 

Other long-term liabilities

41,266

 

 

26,183

 

Total liabilities

921,841

 

 

741,418

 

Stockholders’ equity:

 

 

 

 

 

 

 

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

 

 

 

Authorized shares: 100,000,000; Outstanding shares: 51,915,646 and 49,956,288 at March 31, 2020 and June 30, 2019, respectively

 

 

 

Issued shares: 53,248,771 and 51,289,413 at March 31, 2020 and June 30, 2019, respectively

381,125

 

 

349,683

 

Treasury stock (at cost), 1,333,125 shares at March 31, 2020 and June 30, 2019

(20,491

)

 

(20,491

)

Accumulated other comprehensive loss

(166

)

 

(80

)

Retained earnings

677,761

 

 

611,903

 

Total Super Micro Computer, Inc. stockholders’ equity

1,038,229

 

 

941,015

 

Noncontrolling interest

166

 

 

161

 

Total stockholders’ equity

1,038,395

 

 

941,176

 

Total liabilities and stockholders’ equity

$

1,960,236

 

 

$

1,682,594

 

 

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 (unaudited)

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

2020

 

2019

 

2020

 

2019

Net sales

$

772,408

 

 

$

743,499

 

 

$

2,443,155

 

 

$

2,646,126

 

Cost of sales

639,048

 

 

631,172

 

 

2,040,462

 

 

2,282,638

 

Gross profit

133,360

 

 

112,327

 

 

402,693

 

 

363,488

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

49,586

 

 

44,800

 

 

154,730

 

 

133,718

 

Sales and marketing

21,886

 

 

18,494

 

 

64,057

 

 

56,463

 

General and administrative

46,342

 

 

36,174

 

 

107,680

 

 

106,214

 

Total operating expenses

117,814

 

 

99,468

 

 

326,467

 

 

296,395

 

Income from operations

15,546

 

 

12,859

 

 

76,226

 

 

67,093

 

Other income (expense), net

937

 

 

(86

)

 

2,110

 

 

707

 

Interest expense

(518

)

 

(1,271

)

 

(1,630

)

 

(5,480

)

Income before income tax provision

15,965

 

 

11,502

 

 

76,706

 

 

62,320

 

Income tax provision

899

 

 

(497

)

 

(9,782

)

 

(10,540

)

Share of loss from equity investee, net of taxes

(1,057

)

 

(359

)

 

(1,066

)

 

(3,572

)

Net income

$

15,807

 

 

$

10,646

 

 

$

65,858

 

 

$

48,208

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.31

 

 

$

0.21

 

 

$

1.30

 

 

$

0.97

 

Diluted

$

0.29

 

 

$

0.21

 

 

$

1.26

 

 

$

0.94

 

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

 

 

 

 

 

 

 

Basic

51,526

 

 

49,988

 

 

50,591

 

 

49,845

 

Diluted

53,693

 

 

51,558

 

 

52,399

 

 

51,557

 

 

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

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

2020

 

2019

 

2020

 

2019

Cost of sales

$

370

 

 

$

390

 

 

$

1,149

 

 

$

1,256

 

Research and development

3,043

 

 

3,107

 

 

9,299

 

 

9,816

 

Sales and marketing

417

 

 

418

 

 

1,276

 

 

1,359

 

General and administrative

975

 

 

1,045

 

 

3,099

 

 

3,650

 

Stock-based compensation expense

$

4,805

 

 

$

4,960

 

 

$

14,823

 

 

$

16,081

 

 

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

 (unaudited)

 

 

Nine Months Ended
March 31,

 

2020

 

2019

Net cash provided by operating activities

$

65,716

 

 

$

180,700

 

Net cash used in investing activities

(34,136

)

 

(15,781

)

Net cash provided (used in) financing activities

25,381

 

 

(95,943

)

Effect of exchange rate fluctuations on cash

163

 

 

(88

)

Net increase in cash, cash equivalents and restricted cash

57,124

 

 

68,888

 

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

$

319,264

 

 

$

189,270

 

 

SUPER MICRO COMPUTER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except share and per share amounts)

 (unaudited)

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

2020

 

2019

 

2020

 

2019

GAAP GROSS PROFIT

$

133,360

 

 

$

112,327

 

 

$

402,693

 

 

$

363,488

 

Add back stock-based compensation expenses

370

 

 

390

 

 

1,149

 

 

1,256

 

Add back one-time employee performance bonuses

2,871

 

 

—

 

 

2,871

 

 

—

 

Non-GAAP GROSS PROFIT

$

136,601

 

 

$

112,717

 

 

$

406,713

 

 

$

364,744

 

 

 

 

 

 

 

 

 

GAAP GROSS MARGIN

17.3

%

 

15.1

%

 

16.5

%

 

13.7

%

Add back stock-based compensation expenses

0.0

%

 

0.1

%

 

0.0

%

 

0.1

%

Add back one-time employee performance bonuses

0.4

%

 

0.0

%

 

0.1

%

 

0.0

%

Non-GAAP GROSS MARGIN

17.7

%

 

15.2

%

 

16.6

%

 

13.8

%

 

 

 

 

 

 

 

 

GAAP INCOME FROM OPERATIONS

$

15,546

 

 

$

12,859

 

 

$

76,226

 

 

$

67,093

 

Add back stock-based compensation expenses

4,805

 

 

4,960

 

 

14,823

 

 

16,081

 

Add back legal settlement costs

17,500

 

 

—

 

 

17,500

 

 

—

 

Add back one-time employee performance bonuses

10,329

 

 

—

 

 

10,329

 

 

—

 

Add back controls remediation

1,440

 

 

14,142

 

 

12,859

 

 

46,553

 

Non-GAAP INCOME FROM OPERATIONS

$

49,620

 

 

$

31,961

 

 

$

131,737

 

 

$

129,727

 

 

 

 

 

 

 

 

 

GAAP NET INCOME

$

15,807

 

 

$

10,646

 

 

65,858

 

 

$

48,208

 

Add back stock-based compensation expenses

4,805

 

 

4,960

 

 

14,823

 

 

16,081

 

Add back legal settlement costs

17,500

 

 

—

 

 

17,500

 

 

—

 

Add back one-time employee performance bonuses

10,329

 

 

—

 

 

10,329

 

 

—

 

Add back controls remediation

1,440

 

 

14,142

 

 

12,859

 

 

46,553

 

Add back impairment of an investment

—

 

 

661

 

 

—

 

 

661

 

Less adjustments to tax provision

(3,812

)

 

(4,678

)

 

(8,868

)

 

(14,977

)

Non-GAAP NET INCOME

$

46,069

 

 

$

25,731

 

 

$

112,501

 

 

$

96,526

 

 

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – BASIC

$

0.31

 

 

$

0.21

 

 

$

1.30

 

 

$

0.97

 

Add back stock-based compensation expenses, legal settlement costs, one-time employee performance bonuses, controls remediation, impairment of an investment, less adjustments to tax provision

0.58

 

 

0.30

 

 

0.92

 

 

0.97

 

Non-GAAP NET INCOME PER COMMON SHARE – BASIC

$

0.89

 

 

$

0.51

 

 

$

2.22

 

 

$

1.94

 

 

 

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – DILUTED

$

0.29

 

 

$

0.21

 

 

$

1.26

 

 

$

0.94

 

Add back stock-based compensation expenses, legal settlement costs, one-time employee performance bonuses, controls remediation, impairment of an investment, less adjustments to tax provision

0.55

 

 

0.28

 

 

0.83

 

 

0.88

 

Non-GAAP NET INCOME PER COMMON SHARE – DILUTED

$

0.84

 

 

$

0.49

 

 

$

2.09

 

 

$

1.82

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC – GAAP

51,526

 

 

49,988

 

 

50,591

 

 

49,845

 

BASIC - Non-GAAP

51,526

 

 

49,988

 

 

50,591

 

 

49,845

 

 

 

 

 

 

 

 

 

DILUTED – GAAP

53,693

 

 

51,558

 

 

52,399

 

 

51,557

 

DILUTED - Non-GAAP

55,050

 

 

53,048

 

 

53,913

 

 

53,017