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Supermicro Announces Third Quarter Fiscal Year 2020 Financial Results

May 7, 2020 4:08 PM

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 financial results for its third quarter of fiscal year 2020 ended March 31, 2020.

Third Quarter Fiscal Year 2020 Highlights

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, 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)

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

$

1,149

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

Investor Relations Contact

James Kisner, Investor Relations

(669) 284-1259

email: [email protected]

Source: Super Micro Computer, Inc.

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