Supermicro Announces Third Quarter Fiscal Year 2021 Financial Results

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Super Micro Computer, Inc. (Nasdaq: SMCI), a global leader in high-performance, high-efficiency server and storage technology and green computing, today announced financial results for its third quarter of fiscal year 2021 ended March 31, 2021.

Third Quarter Fiscal Year 2021 Highlights

  • Net sales of $896 million versus $830 million in the second quarter of fiscal year 2021 and $772 million in the same quarter of last year.
  • Gross margin of 13.7% versus 16.4% in the second quarter of fiscal year 2021 and 17.3% in the same quarter of last year.
  • Net income of $18 million versus $28 million in the second quarter of fiscal year 2021 and $16 million in the same quarter of last year.
  • Diluted net income per common share of $0.35 versus $0.52 in the second quarter of fiscal year 2021 and $0.29 in the same quarter of last year.
  • Non-GAAP diluted net income per common share of $0.50 versus $0.63 in the second quarter of fiscal year 2021 and $0.84 in the same quarter of last year.
  • Cash flow used in operations of $124 million and capital expenditures of $19 million.

Non-GAAP gross margin for the third quarter of fiscal year 2021 was 13.8%, which adds back stock-based compensation expenses of $0.4 million. Non-GAAP diluted net income per common share for the third quarter of fiscal year 2021 was $0.50, which adds back stock-based compensation expenses of $7.5 million, special performance bonuses of $2.5 million, and controls remediation expense of $1.2 million, net of the related tax effects.

As of March 31, 2021, total cash, cash equivalents and restricted cash was $179 million and total bank debt was $85 million.

"We are pleased to report Q3 revenue above the high end of our guidance range and deliver year-over-year growth of 16%, our strongest revenue growth rate in more than two years driven by high profile customer engagements. Notably, we strongly bucked seasonal trends in the March quarter." said Charles Liang, Chairman and CEO. "But we are not yet satisfied and aim to accelerate our growth with our robust pipeline of new products leveraging innovations from our key partners AMD, Intel, and NVIDIA. We are well positioned to capitalize on our numerous growth opportunities as we begin to benefit from our capacity expansion in Taiwan and the US."

Fourth Quarter Fiscal Year 2021 Guidance

The Company expects net sales of $980 million to $1.08 billion, diluted net income per common share of $0.56 to $0.77 and non-GAAP diluted net income per common share of $0.70 to $0.90 for the fourth quarter of fiscal year 2021 ending June 30, 2021. The Company's projections for GAAP and non-GAAP diluted net income per common share both assume a tax rate of approximately 13% and a fully diluted share count of 54 million shares. The outlook for Q4 of fiscal year 2021 GAAP diluted net income per common share includes approximately $7 million in expected stock-based compensation expense and $2 million in other expenses, net of tax effects, that are excluded from non-GAAP diluted net income per common 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 2021. Those wishing to access the live webcast may use the following link:

https://event.on24.com/wcc/r/3081432/CECE06854537FC85B1C7606DDC8651FC

The conference call can be accessed by registering online at:

http://www.directeventreg.com/registration/event/4869958

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 2021 guidance, the ability to accelerate sales growth, and the ability to execute on our 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, 2020.

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, controls remediation expenses, legal settlement costs and other non-recurring expenses, and excludes a credit from an executive SEC settlement, which are all adjusted for 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 and storage technology is a premier provider of advanced server Building Block Solutions(R) for Enterprise Data Center, Cloud Computing, Artificial Intelligence, and Edge Computing Systems worldwide. Supermicro is committed to protecting the environment through its "We Keep IT Green(R)" 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,

2021

2020

ASSETS

Current assets:

Cash and cash equivalents

$

177,894

$

210,533

Accounts receivable, net of allowances

407,365

403,745

Inventories

903,903

851,498

Prepaid expenses and other current assets

150,488

126,985

Total current assets

1,639,650

1,592,761

Investment in equity investee

3,637

2,703

Property, plant and equipment, net

265,566

233,785

Deferred income taxes, net

57,624

54,898

Other assets

32,363

34,499

Total assets

$

1,998,840

$

1,918,646

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

465,012

$

417,673

Accrued liabilities

153,742

155,401

Income taxes payable

9,616

4,700

Short-term debt

57,503

23,704

Deferred revenue

96,123

106,157

Total current liabilities

781,996

707,635

Deferred revenue, non-current

93,920

97,612

Long-term debt, net of debt issuance costs

27,867

5,697

Other long-term liabilities

41,109

41,995

Total liabilities

944,892

852,939

Stockholders' equity:

Common stock and additional paid-in capital

425,489

389,972

Treasury stock

--

(20,491

)

Accumulated other comprehensive gain (loss)

362

(152

)

Retained earnings

627,929

696,211

Total Super Micro Computer, Inc. stockholders' equity

1,053,780

1,065,540

Noncontrolling interest

168

167

Total stockholders' equity

1,053,948

1,065,707

Total liabilities and stockholders' equity

$

1,998,840

$

1,918,646

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,

2021

2020

2021

2020

Net sales

$

895,881

$

772,408

$

2,488,437

$

2,443,155

Cost of sales

772,864

639,048

2,099,410

2,040,462

Gross profit

123,017

133,360

389,027

402,693

Operating expenses:

Research and development

57,912

49,586

165,439

154,730

Sales and marketing

21,826

21,886

62,858

64,057

General and administrative

26,224

46,342

75,864

107,680

Total operating expenses

105,962

117,814

304,161

326,467

Income from operations

17,055

15,546

84,866

76,226

Other income (expense), net

2,017

937

(1,363

)

2,110

Interest expense

(607

)

(518

)

(1,850

)

(1,630

)

Income before income tax provision

18,465

15,965

81,653

76,706

Income tax provision

227

899

(8,541

)

(9,782

)

Share of loss from equity investee, net of taxes

(264

)

(1,057

)

(409

)

(1,066

)

Net income

$

18,428

$

15,807

$

72,703

$

65,858

Net income per common share:

Basic

$

0.36

$

0.31

$

1.41

$

1.30

Diluted

$

0.35

$

0.29

$

1.35

$

1.26

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

Basic

50,553

51,526

51,465

50,591

Diluted

53,218

53,693

53,747

52,399

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,

2021

2020

2021

2020

Cost of sales

$

402

$

370

$

1,312

$

1,149

Research and development

3,328

3,043

10,369

9,299

Sales and marketing

503

417

1,517

1,276

General and administrative

3,261

975

7,919

3,099

Stock-based compensation expense

$

7,494

$

4,805

$

21,117

$

14,823

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

(unaudited)

Nine Months Ended
March 31,

2021

2020

Net cash provided by operating activities

$

59,392

$

65,716

Net cash used in investing activities

(44,627

)

(34,136

)

Net cash (used in) provided by financing activities

(48,445

)

25,381

Effect of exchange rate fluctuations on cash

362

163

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

(33,318

)

57,124

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

212,390

262,140

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

$

179,072

$

319,264

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,

2021

2020

2021

2020

GAAP GROSS PROFIT

$

123,017

$

133,360

$

389,027

$

402,693

Stock-based compensation

402

370

1,312

1,149

Special performance bonuses

--

2,871

--

2,871

Other expenses

--

--

20

--

NON-GAAP GROSS PROFIT

$

123,419

$

136,601

$

390,359

$

406,713

GAAP GROSS MARGIN

13.7

%

17.3

%

15.6

%

16.5

%

Stock-based compensation expenses

0.1

%

--

%

0.1

%

--

%

Special performance bonuses

--

%

0.4

%

--

%

0.1

%

Other expenses

--

%

--

%

--

%

--

%

NON-GAAP GROSS MARGIN

13.8

%

17.7

%

15.7

%

16.6

%

GAAP OPERATING EXPENSE

$

105,962

$

117,814

$

304,161

$

326,467

Stock-based compensation

(7,092

)

(4,435

)

(19,805

)

(13,674

)

Legal settlement costs

--

(17,500

)

--

(17,500

)

Executive SEC settlement

--

--

2,122

--

Special performance bonuses

(2,508

)

(7,458

)

(5,129

)

(7,458

)

Other expenses

--

--

(221

)

--

Controls remediation

(1,239

)

(1,440

)

(1,239

)

(12,859

)

NON-GAAP OPERATING EXPENSE

$

95,123

$

86,981

$

279,889

$

274,976

GAAP INCOME FROM OPERATIONS

$

17,055

$

15,546

$

84,866

$

76,226

Stock-based compensation

7,494

4,805

21,117

14,823

Legal settlement costs

--

17,500

--

17,500

Executive SEC settlement

--

--

(2,122

)

--

Special performance bonuses

2,508

10,329

5,129

10,329

Other expenses

--

--

241

--

Controls remediation

1,239

1,440

1,239

12,859

NON-GAAP INCOME FROM OPERATIONS

$

28,296

$

49,620

$

110,470

$

131,737

GAAP TAX EXPENSE

$

(227

)

$

(899

)

$

8,541

$

9,782

Adjustments to tax provision

2,473

3,812

5,633

8,868

NON-GAAP TAX EXPENSE

$

2,246

$

2,913

$

14,174

$

18,650

GAAP NET INCOME

$

18,428

$

15,807

$

72,703

$

65,858

Stock-based compensation

7,494

4,805

21,117

14,823

Legal settlement costs

--

17,500

--

17,500

Executive SEC settlement

--

--

(2,122

)

--

Special performance bonuses

2,508

10,329

5,129

10,329

Other expenses

--

--

241

--

Controls remediation

1,239

1,440

1,239

12,859

Adjustments to tax provision

(2,473

)

(3,812

)

(5,633

)

(8,868

)

NON-GAAP NET INCOME

$

27,196

$

46,069

$

92,674

$

112,501

GAAP NET INCOME PER COMMON SHARE - BASIC

$

0.36

$

0.31

$

1.41

$

1.30

Impact of Non-GAAP adjustments

0.18

0.58

0.39

0.92

NON-GAAP NET INCOME PER COMMON SHARE - BASIC

$

0.54

$

0.89

$

1.80

$

2.22

GAAP NET INCOME PER COMMON SHARE - DILUTED

$

0.35

$

0.29

$

1.35

$

1.26

Impact of Non-GAAP adjustments

0.15

0.55

0.33

0.83

NON-GAAP NET INCOME PER COMMON SHARE - DILUTED

$

0.50

$

0.84

$

1.68

$

2.09

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

BASIC - GAAP

50,553

51,526

51,465

50,591

BASIC - NON-GAAP

50,553

51,526

51,465

50,591

DILUTED - GAAP

53,218

53,693

53,747

52,399

DILUTED - NON-GAAP

54,525

55,050

55,185

53,913