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Supermicro Announces Third Quarter Fiscal Year 2023 Financial Results

Supermicro (Nasdaq: SMCI), a Total IT Solution Provider for Cloud, AI/ML, Storage, and 5G/Edge, today announced financial results for its third quarter of fiscal year 2023 ended March 31, 2023.

Third Quarter Fiscal Year 2023 Highlights

  • Net sales of $1.28 billion versus $1.80 billion in the second quarter of fiscal year 2023 and $1.36 billion in the same quarter of last year.
  • Gross margin of 17.6% versus 18.7% in the second quarter of fiscal year 2023 and 15.5% in the same quarter of last year.
  • Net income of $86 million versus $176 million in the second quarter of fiscal year 2023 and $77 million in the same quarter of last year.
  • Diluted net income per common share of $1.53 versus $3.14 in the second quarter of fiscal year 2023 and $1.43 in the same quarter of last year.
  • Non-GAAP diluted net income per common share of $1.63 versus $3.26 in the second quarter of fiscal year 2023 and $1.55 in the same quarter of last year.
  • Cash flow provided by operations for the third quarter of fiscal year 2023 of $198 million and capital expenditures of $8 million.

Non-GAAP gross margin for the third quarter of fiscal year 2023 was 17.7% which adds back stock-based compensation expenses of $1 million. Non-GAAP diluted net income per common share for the third quarter of fiscal year 2023 was $1.63, with adjustments for stock-based compensation expenses of $14 million and $2 million litigation expense recovery, net of the related tax effects of $4 million.

As of March 31, 2023, total cash and cash equivalents was $363 million and total bank debt was $187 million.

“Supermicro continues to see record levels of engagements in our new generation product lines, especially for AI applications," said Charles Liang, President and CEO of Supermicro. "We secured several new and large design wins and are deploying some of the world’s most leading GPU clusters. With the recent new key components supply chain challenges mostly in the rear-view mirror and production normalizing, we expect to gain share and expand scale as we emerge as the true leader for rack-scale Total IT Solutions.”

Business Outlook and Management Commentary

For the fourth quarter of fiscal year 2023 ending June 30, 2023, the Company expects net sales of $1.7 billion to $1.9 billion, GAAP net income per diluted share of $2.13 to $2.65 and non-GAAP net income per diluted share of $2.21 to $2.71. The Company’s projections for GAAP and non-GAAP net income per diluted share assume a tax rate of approximately 14.7% and 15.7%, respectively, and a fully diluted share count of 56 million shares for GAAP and fully diluted share count of 57 million shares for non-GAAP. The outlook for Q4 of fiscal year 2023 GAAP net income per diluted share includes approximately $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.

For fiscal year 2023 ending June 30, 2023, the Company maintains its guidance for net sales from a range of $6.6 billion to $6.8 billion, GAAP net income per diluted share from a range of $10.14 to $10.66, and non-GAAP net income per diluted share from a range of $10.50 to $11.00. The Company’s projections for annual GAAP and non-GAAP net income per diluted share assume a tax rate of approximately 14.9% and 16.0%, respectively, and a fully diluted share count of 56 million shares for GAAP and fully diluted share count of 57 million shares for non-GAAP. The outlook for fiscal year 2023 GAAP net income per diluted share includes approximately $33 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 third quarter of fiscal year 2023.

Those wishing to access the live webcast may use the following link: https://events.q4inc.com/attendee/104078846

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 fourth quarter of fiscal year 2023 and full year fiscal 2023 guidance, record levels of engagement in new product lines, resolving recent supply chain challenges and production normalizing, gaining share, and expanding scale. 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 may continue to present significant uncertainties for 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, litigation settlement costs, special performance bonuses and litigation expense (recovery), 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 GAAP gross margin to non-GAAP gross margin and from GAAP 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)

 

 

 

 

 

 

 

March 31,

 

June 30,

 

 

2023

 

2022

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

$

362,801

 

$

267,397

 

Accounts receivable, net of allowance for credit losses

 

672,055

 

 

834,513

 

Inventories

 

1,540,419

 

 

1,545,606

 

Prepaid expenses and other current assets

 

139,900

 

 

158,799

 

Total current assets

 

2,715,175

 

 

2,806,315

 

Property, plant and equipment, net

 

290,038

 

 

285,972

 

Deferred income taxes, net

 

148,558

 

 

69,929

 

Other assets

 

38,833

 

 

42,861

 

Total assets

$

3,192,604

 

$

3,205,077

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Accounts payable

$

641,839

 

$

655,403

 

Accrued liabilities

 

155,224

 

 

212,419

 

Income taxes payable

 

92,598

 

 

41,743

 

Short-term debt

 

53,972

 

 

449,146

 

Deferred revenue

 

148,747

 

 

111,313

 

Total current liabilities

 

1,092,380

 

 

1,470,024

 

Deferred revenue, non-current

 

161,176

 

 

122,548

 

Long-term debt

 

133,235

 

 

147,618

 

Other long-term liabilities

 

37,240

 

 

39,140

 

Total liabilities

 

1,424,031

 

 

1,779,330

 

Stockholders’ equity:

 

 

Common stock and additional paid-in capital

 

528,279

 

 

481,741

 

Accumulated other comprehensive income

 

683

 

 

911

 

Retained earnings

 

1,239,445

 

 

942,923

 

Total Super Micro Computer, Inc. stockholders’ equity

 

1,768,407

 

 

1,425,575

 

Noncontrolling interest

 

166

 

 

172

 

Total stockholders’ equity

 

1,768,573

 

 

1,425,747

 

Total liabilities and stockholders’ equity

$

3,192,604

 

$

3,205,077

 

 

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

Nine Months Ended

March 31,

 

 

2023

 

2022

 

2023

 

2022

Net sales

$

1,283,296

 

$

1,355,490

 

$

4,938,621

 

$

3,560,639

 

Cost of sales

 

1,056,937

 

 

1,144,715

 

 

4,027,305

 

 

3,047,982

 

Gross profit

 

226,359

 

 

210,775

 

 

911,316

 

 

512,657

 

Operating expenses:

 

 

 

 

Research and development

 

77,515

 

 

70,869

 

 

222,458

 

 

201,483

 

Sales and marketing

 

25,312

 

 

22,356

 

 

83,120

 

 

65,940

 

General and administrative

 

24,450

 

 

27,773

 

 

71,351

 

 

75,280

 

Total operating expenses

 

127,277

 

 

120,998

 

 

376,929

 

 

342,703

 

Income from operations

 

99,082

 

 

89,777

 

 

534,387

 

 

169,954

 

Other (expense) income, net

 

(78

)

 

4,663

 

 

1,641

 

 

4,106

 

Interest expense

 

(1,288

)

 

(1,531

)

 

(6,982

)

 

(3,485

)

Income before income tax provision

 

97,716

 

 

92,909

 

 

529,046

 

 

170,575

 

Income tax (provision)

 

(10,857

)

 

(16,192

)

 

(79,364

)

 

(27,116

)

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

 

(1,013

)

 

255

 

 

(3,253

)

 

882

 

Net income

$

85,846

 

$

76,972

 

$

446,429

 

$

144,341

 

Net income per common share:

 

 

 

 

Basic

$

1.61

 

$

1.49

 

$

8.42

 

$

2.82

 

Diluted

$

1.53

 

$

1.43

 

$

8.00

 

$

2.70

 

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

 

 

 

 

Basic

 

53,280

 

 

51,708

 

 

53,011

 

 

51,269

 

Diluted

 

56,233

 

 

53,786

 

 

55,796

 

 

53,401

 

 

 

 

 

 

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,

 

 

2023

 

2022

 

2023

 

2022

Cost of sales

$

1,215

 

 

$

460

 

 

$

3,585

 

 

$

1,378

 

Research and development

 

8,097

 

 

 

4,141

 

 

 

23,549

 

 

 

12,124

 

Sales and marketing

 

1,214

 

 

 

504

 

 

 

3,471

 

 

 

1,517

 

General and administrative

 

3,126

 

 

 

2,636

 

 

 

11,042

 

 

 

8,913

 

Stock-based compensation expense

$

13,652

 

 

$

7,741

 

 

$

41,647

 

 

$

23,932

 

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

March 31,

 

2023

2022

Net cash provided by (used in) operating activities

$

672,919

 

$

(415,658

)

Net cash (used in) investing activities

 

(28,618

)

 

(35,257

)

Net cash (used in) provided by financing activities

 

(547,291

)

 

466,365

 

Effect of exchange rate fluctuations on cash

 

(2,269

)

 

(304

)

Net increase in cash, cash equivalents and restricted cash

 

94,741

 

 

15,146

 

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

$

363,300

 

$

248,595

 

 

SUPER MICRO COMPUTER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands except per share amounts)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

Nine Months Ended

March 31,

 

 

2023

 

2022

 

2023

 

2022

GAAP GROSS PROFIT

$

226,359

 

$

210,775

 

$

911,316

 

$

512,657

 

Stock-based compensation

 

1,215

 

 

460

 

 

3,585

 

 

1,378

 

Other expenses

 

 

 

 

 

 

 

295

 

NON-GAAP GROSS PROFIT

$

227,574

 

$

211,235

 

$

914,901

 

$

514,330

 

 

 

 

 

 

GAAP GROSS MARGIN

 

17.6

%

 

15.5

%

 

18.5

%

 

14.4

%

Stock-based compensation

 

0.1

%

 

0.1

%

 

0.1

%

 

0.1

%

Other expenses

 

%

 

%

 

%

 

0.0

%

NON-GAAP GROSS MARGIN

 

17.7

%

 

15.6

%

 

18.6

%

 

14.5

%

 

 

 

 

 

GAAP OPERATING EXPENSE

$

127,277

 

$

120,998

 

$

376,929

 

$

342,703

 

Stock-based compensation

 

(12,437

)

 

(7,281

)

 

(38,062

)

 

(22,554

)

Litigation settlement costs

 

 

 

(2,000

)

 

 

 

(2,000

)

Special performance bonuses

 

 

 

 

 

 

 

(158

)

Litigation recovery (expense)

 

1,540

 

 

(2,210

)

 

3,770

 

 

(4,133

)

NON-GAAP OPERATING EXPENSE

$

116,380

 

$

109,507

 

$

342,637

 

$

313,858

 

 

 

 

 

 

GAAP INCOME FROM OPERATIONS

$

99,082

 

$

89,777

 

$

534,387

 

$

169,954

 

Stock-based compensation

 

13,652

 

 

7,741

 

 

41,647

 

 

23,932

 

Litigation settlement costs

 

 

 

2,000

 

 

 

 

2,000

 

Special performance bonuses

 

 

 

 

 

 

 

453

 

Litigation (recovery) expense

 

(1,540

)

 

2,210

 

 

(3,770

)

 

4,133

 

NON-GAAP INCOME FROM OPERATIONS

$

111,194

 

$

101,728

 

$

572,264

 

$

200,472

 

 

 

 

 

 

GAAP OPERATING MARGIN

 

7.7

%

 

6.6

%

 

10.8

%

 

4.8

%

Stock-based compensation

 

1.1

%

 

0.6

%

 

0.8

%

 

0.7

%

Litigation settlement costs

 

%

 

0.1

%

 

%

 

0.1

%

Special performance bonuses

 

%

 

%

 

%

 

0.0

%

Litigation (recovery) expense

 

(0.1

)%

 

0.2

%

 

(0.1

)%

 

0.1

%

NON-GAAP OPERATING MARGIN

 

8.7

%

 

7.5

%

 

11.5

%

 

5.7

%

 

 

 

 

 

GAAP TAX EXPENSE

$

10,857

 

$

16,192

 

$

79,364

 

$

27,116

 

Adjustments to tax provision

 

4,433

 

 

3,415

 

 

11,963

 

$

9,584

 

NON-GAAP TAX EXPENSE

$

15,290

 

$

19,607

 

$

91,327

 

$

36,700

 

 

 

 

 

 

GAAP NET INCOME

$

85,846

 

$

76,972

 

$

446,429

 

$

144,341

 

Stock-based compensation

 

13,652

 

 

7,741

 

 

41,647

 

 

23,932

 

Litigation settlement costs

 

 

 

2,000

 

 

 

 

2,000

 

Special performance bonuses

 

 

 

 

 

 

 

453

 

Litigation (recovery) expense

 

(1,540

)

 

2,210

 

 

(3,770

)

 

4,133

 

Adjustments to tax provision

 

(4,433

)

 

(3,415

)

 

(11,963

)

 

(9,584

)

NON-GAAP NET INCOME

$

93,525

 

$

85,508

 

$

472,343

 

$

165,275

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – BASIC

$

1.61

 

$

1.49

 

$

8.42

 

$

2.82

 

Impact of Non-GAAP adjustments

 

0.15

 

 

0.16

 

 

0.49

 

 

0.40

 

NON-GAAP NET INCOME PER COMMON SHARE – BASIC

$

1.76

 

$

1.65

 

$

8.91

 

$

3.22

 

 

 

 

 

 

GAAP NET INCOME PER COMMON SHARE – DILUTED

$

1.53

 

$

1.43

 

$

8.00

 

$

2.70

 

Impact of Non-GAAP adjustments

 

0.10

 

 

0.12

 

 

0.29

 

 

0.31

 

NON-GAAP NET INCOME PER COMMON SHARE – DILUTED

$

1.63

 

$

1.55

 

$

8.29

 

$

3.01

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

BASIC – GAAP

 

53,280

 

 

51,708

 

 

53,011

 

 

51,269

 

BASIC – NON-GAAP

 

53,280

 

 

51.708

 

 

53,011

 

 

51,269

 

 

 

 

 

 

DILUTED – GAAP

 

56,233

 

 

53,786

 

 

55,796

 

 

53,401

 

DILUTED – NON-GAAP

 

57,315

 

 

55.194

 

 

56,966

 

 

54.831

 

Non-GAAP diluted net income per common share for the second quarter of fiscal year 2023 ended December 31, 2022 was $3.26, with adjustments for stock-based compensation expenses of $17 million and $2 million litigation expense recovery, net of the related tax effects of $4 million.

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