SAN JOSE, Calif.--(BUSINESS WIRE)--Super Micro Computer, Inc. (NASDAQ:SMCI), a leader in application optimized, high performance server solutions, today announced third quarter fiscal 2011 financial results for the quarter ended March 31, 2011.
Fiscal 3rd Quarter Highlights
- Quarterly net sales of $234.3 million, down 2.7% from the second quarter of fiscal year 2011 and up 23.8% from the same quarter of last year.
- Net income of $10.7 million, down 7.5% from the second quarter of fiscal year 2011 and up 38.3% from the same quarter of last year.
- Gross margin of 16.2%, down from 16.7% in the second quarter of fiscal year 2011 and up 0.7% from the same quarter of last year.
- Server Solutions accounted for 31.8% of net sales compared with 40.5% in the second quarter of fiscal year 2011 and 33.6% in the same quarter of last year.
Net sales for the third quarter ended March 31, 2011 totaled $234.3 million, up 23.8% from $189.3 million in the third quarter of fiscal year 2010. No customer accounted for more than 10% of net sales during the quarter.
Net income for the third quarter of fiscal year 2011 was $10.7 million or $0.25 per diluted share, an increase of 38.3% from the net income of $7.7 million, or $0.18 per diluted share in the same period a year ago. Included in net income for the quarter is $2.1 million of stock-based compensation expense (pre-tax). Excluding this item and the related tax effect, non-GAAP net income for the third quarter was $12.3 million, or $0.28 per diluted share, compared to non-GAAP net income of $8.9 million, or $0.21 per diluted share, in the same quarter of the prior year. On a sequential basis, non-GAAP net income decreased from the second quarter of fiscal year 2011 by $1.1 million or $0.03 per diluted share.
Gross margin for the third quarter was 16.2% compared to 15.5% in the same period a year ago. Non-GAAP gross margin for the third quarter was 16.2% compared to 15.5% in the same period a year ago. Non-GAAP gross margin was 16.8% for the second quarter of fiscal year 2011.
The Company's cash and cash equivalents and short and long term investments at March 31, 2011 were $73.5 million compared to $79.4 million at June 30, 2010. Free cash flow in the nine months ended March 31, 2011 was ($21.3) million primarily due to an increase in inventory to support the growth of the Company and investments in property for our expansion overseas.
Business Outlook & Management Commentary
The Company expects net sales of $245 million to $260 million for the fourth quarter of fiscal year 2011 ending June 30, 2011. The Company expects non-GAAP earnings per diluted share of approximately $0.28 to $0.30 for the fourth quarter.
“We are pleased that our third quarter revenues were 24% higher and earnings were 38% higher than last year. The growth momentum of our storage and blade product lines as well as our growth in Asia has delivered significant results in this quarter and over the last year,” said Charles Liang, Chairman and CEO. “We are preparing for growth in the upcoming quarters with investments in our industry leading technology for upcoming launches. We are also continuing to invest in capacity in Asia in order to meet the significant demand for our products worldwide.”
It is currently expected that the outlook will not be updated until the Company’s next quarterly earnings announcement, notwithstanding subsequent developments. However, the Company may update the outlook or any portion thereof at any time. Such updates will take place only by way of a news release or other broadly disseminated disclosure available to all interested parties in accordance with Regulation FD.
Conference Call Information
Super Micro Computer will discuss these financial results in a conference call at 2:00 p.m. PT, today. To participate the conference, please call 1-888-819-8001 (international callers dial 1-913-312-9308) 10 minutes prior. A recording of the conference will be available until 11:59 pm ET on Tuesday, May 10, 2011 by dialing 877-870-5176 (international callers dial 1-858-384-5517) and entering replay PIN 2371817. The live web cast and recording of the call will be available on the Investor Relations section at www.supermicro.com two hours after the conference conclusion. They will remain available until the Company's next earnings call.
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, among other things, to our expected financial and operating results, our ability to build and grow Super Micro Computer, the benefits of our products and our ability to achieve our goals, plans and objectives. 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. These include, but are not limited to: our dependence on continued growth in the markets for X86, blade servers and embedded applications, increased competition, difficulties of predicting timing, introduction and customer acceptance of new products, poor product sales, difficulties in establishing and maintaining successful relationships with our distributors and vendors, shortages or price fluctuations in our supply chain, our ability to protect our intellectual property rights, our ability to control the rate of expansion domestically and internationally, difficulty managing rapid growth and general political, economic and market conditions and events. 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.
Use of Non-GAAP Financial Measures
Non-GAAP gross margin discussed in this press release excludes stock-based compensation expense. Non-GAAP net income and net income per share discussed in this press release exclude stock-based compensation expense, a provision for litigation costs and the related tax effect 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. Pursuant to the requirements of SEC Regulation G, detailed reconciliations between the Company's GAAP and non-GAAP financial results is provided at the end of this press release. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company's SEC filings.
About Super Micro Computer, Inc.
Supermicro, the leader in server technology innovation and green computing, provides customers around the world with application-optimized server, workstation, blade, storage and GPU systems. Based on its advanced Server Building Block Solutions, Supermicro offers the most optimized selection for IT, datacenter and HPC deployments. The company’s system architecture innovations include the Twin server, double-sided storage and SuperBlade® product families. Offering the most comprehensive product lines in the industry, Supermicro provides businesses of all sizes with energy-efficient, earth-friendly solutions that deliver unmatched performance and value. Founded in 1993, Supermicro is headquartered in Silicon Valley with worldwide operations and manufacturing centers in Europe and Asia. For more information, visit www.supermicro.com.
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SUPER MICRO COMPUTER, INC. |
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| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| March 31, | June 30, | ||||||||||
| 2011 | 2010 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 68,096 | $ | 72,644 | |||||||
| Short-term investments | 59 | 845 | |||||||||
| Accounts receivable, net | 79,766 | 72,963 | |||||||||
| Inventory, net | 205,641 | 135,584 | |||||||||
| Deferred income taxes – current | 9,336 | 9,756 | |||||||||
| Prepaid income taxes | 5,485 | 2,737 | |||||||||
| Prepaid expenses and other current assets | 3,675 | 2,328 | |||||||||
| Total current assets | 372,058 | 296,857 | |||||||||
| Long-term investments | 5,388 | 5,901 | |||||||||
| Property, plant and equipment, net | 69,639 | 62,691 | |||||||||
| Deferred income taxes – noncurrent | 2,886 | 4,825 | |||||||||
| Restricted assets | 403 | 286 | |||||||||
| Other assets | 11,525 | 202 | |||||||||
| Total assets | $ | 461,899 | $ | 370,762 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 128,542 | $ | 95,416 | |||||||
| Accrued liabilities | 23,236 | 19,432 | |||||||||
| Income taxes payable | 1,545 | 3,219 | |||||||||
| Advances from receivable financing arrangements | 957 | 1,193 | |||||||||
| Short-term debt | - | 18,553 | |||||||||
| Current portion of long-term debt | 555 | - | |||||||||
| Current portion of capital lease obligations | 39 | 62 | |||||||||
| Total current liabilities | 154,874 | 137,875 | |||||||||
| Long-term capital lease obligations-net of current portion | 63 | 46 | |||||||||
| Long term debt-net of current portion | 27,547 | - | |||||||||
| Other long-term liabilities | 9,821 | 8,140 | |||||||||
| Total liabilities | 192,305 | 146,061 | |||||||||
| Stockholders' equity: | |||||||||||
| Common stock and additional paid-in capital | 115,761 | 100,350 | |||||||||
| Treasury stock (at cost) | (2,030 | ) | (2,030 | ) | |||||||
| Accumulated other comprehensive loss | (204 | ) | (204 | ) | |||||||
| Retained earnings | 156,067 | 126,585 | |||||||||
| Total stockholders' equity | 269,594 | 224,701 | |||||||||
| Total liabilities and stockholders' equity | $ | 461,899 | $ | 370,762 | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (In thousands, except share and per share amounts) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net sales | $ | 234,288 | $ | 189,276 | $ 682,279 | $ 519,774 | |||||||||
| Cost of sales | 196,432 | 160,011 | 571,207 | 435,691 | |||||||||||
| Gross profit | 37,856 | 29,265 | 111,072 | 84,083 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 12,202 | 9,757 | 34,945 | 27,138 | |||||||||||
| Sales and marketing | 6,538 | 5,513 | 19,447 | 15,185 | |||||||||||
| General and administrative | 3,958 | 3,461 | 12,589 | 11,310 | |||||||||||
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Provision for litigation loss |
- | - | - | 1,089 | |||||||||||
| Total operating expenses | 22,698 | 18,731 | 66,981 | 54,722 | |||||||||||
| Income from operations | 15,158 | 10,534 | 44,091 | 29,361 | |||||||||||
| Interest and other income, net | 21 | 19 | 56 | 77 | |||||||||||
| Interest expense | (161 | ) | (66 | ) | (489 | ) | (289 | ) | |||||||
| Income before income tax provision | 15,018 | 10,487 | 43,658 | 29,149 | |||||||||||
| Income tax provision | 4,322 | 2,754 | 14,176 | 9,949 | |||||||||||
| Net income | $ | 10,696 | $ | 7,733 | $ 29,482 | $ 19,200 | |||||||||
| Net income per common share: | |||||||||||||||
| Basic (a) | $ | 0.28 | $ | 0.21 | $ 0.77 | $ 0.53 | |||||||||
| Diluted (b) | $ | 0.25 | $ | 0.18 | $ 0.69 | $ 0.47 | |||||||||
| Weighted-average shares used in calculation of net income per common share: | |||||||||||||||
| Basic | 38,268,864 | 36,219,222 | 37,674,273 | 35,563,187 | |||||||||||
| Diluted | 42,853,955 | 41,733,900 | 41,979,180 | 40,212,441 | |||||||||||
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Stock-based compensation is included in the following cost and expense categories by period (in thousands): |
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| Three Months Ended | Nine Months Ended | ||||||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Cost of sales | $ | 203 | $ | 108 | $ 570 | $ 410 | |||||||||
| Research and development | 1,082 | 901 | 2,874 | 2,327 | |||||||||||
| Sales and marketing | 255 | 172 | 786 | 625 | |||||||||||
| General and administrative | 528 | 359 | 1,492 | 1,416 | |||||||||||
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SUPER MICRO COMPUTER, INC |
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CONDENSED CONSOLIDATED CASH FLOW STATEMENTS |
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| (In thousands) | ||||||||
| (Unaudited) | ||||||||
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Nine Months Ended |
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| 2011 | 2010 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 29,482 | $ | 19,200 | ||||
| Reconciliation of net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 3,990 | 3,416 | ||||||
| Stock-based compensation expense | 5,722 | 4,778 | ||||||
| Excess tax benefits from stock-based compensation | (1,824 | ) | (1,361 | ) | ||||
| Allowance for doubtful accounts | 578 | 426 | ||||||
| Allowance for sales returns | 3,844 | 3,875 | ||||||
| Provision for inventory | 1,592 | 1,809 | ||||||
| Loss on disposal of property, plant and equipment | - | 1 | ||||||
| Deferred income taxes | 2,359 | (1,705 | ) | |||||
| Gain on short-term investments | - | (1 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (11,225 | ) | (22,460 | ) | ||||
| Inventory | (71,649 | ) | (56,177 | ) | ||||
| Prepaid expenses and other assets | (3,651 | ) | (339 | ) | ||||
| Accounts payable | 32,795 | 29,995 | ||||||
| Income taxes payable, net | 740 | 4,069 | ||||||
| Accrued liabilities | 3,804 | 4,280 | ||||||
| Other long-term liabilities | 1,681 | 2,012 | ||||||
| Net cash used in operating activities | (1,762 | ) | (8,182 | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from investments | 1,300 | 8,940 | ||||||
| Purchases of property, plant and equipment | (10,561 | ) | (2,785 | ) | ||||
| Restricted assets | (117 | ) | 1,544 | |||||
| Other assets | (9,020 | ) | - | |||||
| Net cash provided by (used in) investing activities | (18,398 | ) | 7,699 | |||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from long-term debt | 23,542 | - | ||||||
| Repayment of debt | (13,993 | ) | (9,994 | ) | ||||
| Proceeds from exercise of stock options | 5,961 | 5,112 | ||||||
| Excess tax benefits from stock-based compensation | 1,824 | 1,361 | ||||||
| Payment of obligations under capital leases | (52 | ) | (30 | ) | ||||
| Advances (payment) under receivable financing arrangements | (236 | ) | 470 | |||||
| Minimum tax withholding paid on behalf of employees for restricted stock awards | (1,434 | ) | - | |||||
| Net cash provided by (used in) financing activities | 15,612 | (3,081 | ) | |||||
| Net decrease in cash and cash equivalents | (4,548 | ) | (3,564 | ) | ||||
| Cash and cash equivalents at beginning of period | 72,644 | 70,295 | ||||||
| Cash and cash equivalents at end of period | $ | 68,096 | $ | 66,731 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 454 | $ | 290 | ||||
| Cash paid for taxes, net of refunds | 9,506 | 6,036 | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accrued costs for property, plant and equipment purchases | 822 | 411 | ||||||
| Changes in fair values of investments | - | 686 | ||||||
| Equipment purchased under capital leases | 46 | - | ||||||
| SUPER MICRO COMPUTER, INC | |||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
| (In thousands, except share and per share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| GAAP GROSS PROFIT | $ | 37,856 | $ | 29,265 | $ | 111,072 | $ | 84,083 | |||||||||
| Add back stock-based compensation (c) | 203 | 108 | 570 | 410 | |||||||||||||
| Non-GAAP GROSS PROFIT | $ | 38,059 | $ | 29,373 | $ | 111,642 | $ | 84,493 | |||||||||
| GAAP GROSS MARGIN | 16.2 | % | 15.5 | % | 16.3 | % | 16.2 | % | |||||||||
| Add back stock-based compensation (c) | 0.0 | % | 0.0 | % | 0.1 | % | 0.1 | % | |||||||||
| Non-GAAP GROSS MARGIN | 16.2 | % | 15.5 | % | 16.4 | % | 16.3 | % | |||||||||
| GAAP INCOME FROM OPERATIONS | $ | 15,158 | $ | 10,534 | $ | 44,091 | $ | 29,361 | |||||||||
| Add back stock-based compensation (c) | 2,068 | 1,540 | 5,722 | 4,778 | |||||||||||||
| Add back provision for litigation loss (d) | - | - | 729 | 1,089 | |||||||||||||
| Non-GAAP INCOME FROM OPERATIONS | $ | 17,226 | $ | 12,074 | $ | 50,542 | $ | 35,228 | |||||||||
| GAAP NET INCOME | $ | 10,696 | $ | 7,733 | $ | 29,482 | $ | 19,200 | |||||||||
| Add back stock-based compensation (c) | 2,068 | 1,540 | 5,722 | 4,778 | |||||||||||||
| Add back provision for litigation loss (d) | - | - | 729 | 1,089 | |||||||||||||
| Add back adjustments to tax provision (e) | (505 | ) | (339 | ) | (1,075 | ) | (1,073 | ) | |||||||||
| Non-GAAP NET INCOME | $ | 12,259 | $ | 8,934 | $ | 34,858 | $ | 23,994 | |||||||||
| GAAP NET INCOME PER COMMON SHARE – BASIC (a) | $ | 0.28 | $ | 0.21 | $ | 0.77 | $ | 0.53 | |||||||||
| Add back stock-based compensation, provision for litigation loss and adjustments to tax provision (c) (d) (e) | 0.04 | 0.03 | 0.14 | 0.13 | |||||||||||||
| Non-GAAP NET INCOME PER COMMON SHARE – BASIC (f) | $ | 0.32 | $ | 0.24 | $ | 0.91 | $ | 0.66 | |||||||||
| GAAP NET INCOME PER COMMON SHARE – DILUTED (b) | $ | 0.25 | $ | 0.18 | $ | 0.69 | $ | 0.47 | |||||||||
| Add back stock-based compensation, provision for litigation loss and adjustments to tax provision (c) (d) (e) | 0.03 | 0.03 | 0.12 | 0.10 | |||||||||||||
| Non-GAAP NET INCOME PER COMMON SHARE – DILUTED (g) | $ | 0.28 | $ | 0.21 | $ | 0.81 | $ | 0.57 | |||||||||
| WEIGHTED-AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE | |||||||||||||||||
| BASIC –GAAP (h) | 38,268,864 | 36,219,222 | 37,674,273 | 35,563,187 | |||||||||||||
| BASIC - Non-GAAP (i) | 38,807,787 | 36,219,222 | 38,323.889 | 35,563,187 | |||||||||||||
| DILUTED – GAAP (h) | 42,853,955 | 41,733,900 | 41,979,180 | 40,212,441 | |||||||||||||
| DILUTED - Non-GAAP (i) | 43,981,761 | 42,452,248 | 43,123,676 | 40,901,106 | |||||||||||||
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| (a) Approximately $149,000 and $500,000 of undistributed earnings allocated to participating securities were not included in the determination of GAAP basic net income per common share for the three and nine months ended March 31, 2011, respectively, and approximately $178,000 and $451,000 for the three and nine months ended March 31, 2010, respectively. | |||||||||||||||||
| (b) Approximately $133,000 and $449,000 of undistributed earnings allocated to participating securities were not included in the determination of GAAP diluted net income per common share for the three and nine months ended March 31, 2011, respectively, and approximately $155,000 and $400,000 for the three and nine months ended March 31, 2010, respectively. | |||||||||||||||||
| (c) Amortization of ASC Topic 718 (SFAS No. 123R, APB 25 and SFAS No. 123) stock-based compensation for the three and nine months ended March 31, 2011 and 2010. | |||||||||||||||||
| (d) Provision for litigation costs for the nine months ended March 31, 2011 was related to a settlement of a patent litigation in September 2010. Provision for litigation costs for the nine months ended March 31, 2010 was related to a commercial lawsuit filed in 1999. | |||||||||||||||||
| (e) The provision of income taxes used in arriving at the non-GAAP net income was computed using an income tax rate of 28.3% and 25.7% for the three months ended March 31, 2011 and 2010, respectively, and 30.4% and 31.5% for the nine months ended March 31, 2011 and 2010, respectively. | |||||||||||||||||
| (f) Approximately $170,000 and $591,000 of undistributed earnings allocated to participating securities were not included in the determination of Non-GAAP basic net income per common share for the three and nine months ended March 31, 2011, respectively. | |||||||||||||||||
| (g) Approximately $150,000 and $525,000 of undistributed earnings allocated to participating securities were not included in the determination of Non-GAAP diluted net income per common share for the three and nine months ended March 31, 2011, respectively. | |||||||||||||||||
| (h) 538,923 and 649,616 shares of unvested restricted stock awards were not included in the determination of GAAP basic and diluted net income per common share for the three and nine months ended March 31, 2011, respectively. 855,523 shares of unvested restricted stock awards were not included in the determination of GAAP basic and diluted net income per common share for the three and nine months ended March 31, 2010. | |||||||||||||||||
| (i) 538,923 and 649,616 shares of unvested restricted stock awards were included in the determination of Non-GAAP basic and diluted net income per share for the three and nine months ended March 31, 2011, respectively. | |||||||||||||||||
SMCI-F