Business Wire | Aug 11, 2020 04:05PM EDT

Supermicro Announces Fourth Quarter and Full Year Fiscal Year 2020 Financial Results and Stock Repurchase Authorization

Aug. 11, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 11, 2020--Super Micro Computer, Inc. (Nasdaq: SMCI), a global leader in high-performance, high-efficiency server and storage technology and green computing, today announced fourth quarter and full-year financial results for fiscal year 2020 ended June 30, 2020.

Fourth Quarter of Fiscal Year 2020 Highlights

* Net sales of $896 million versus $772 million in the third quarter of fiscal year 2020 and $854 million in the same quarter of last year.

* Gross margin of 13.8% versus 17.3% in the third quarter of fiscal year 2020 and 15.5% in the same quarter of last year.

* Net income of $18 million versus $16 million in the third quarter of fiscal year 2020 and $24 million in the same quarter of last year.

* Diluted net income per common share of $0.34 versus $0.29 in the third quarter of fiscal year 2020 and $0.46 in the same quarter of last year.

* Non-GAAP diluted net income per common share of $0.68 versus $0.84 in the third quarter of fiscal year 2020 and $0.69 in the same quarter of last year.

* Cash flow used in operations of $96 million and capital expenditures of $9 million.

Non-GAAP gross margin for the fourth quarter of fiscal year 2020 was 14.0%, which adds back stock-based compensation expense of $0.4 million, one-time employee performance bonuses of $1.2 million, and certain other expenses. Non-GAAP diluted net income per common share for the fourth quarter of fiscal year 2020 was $0.68, which adds back stock-based compensation expense of $5.4 million, one-time employee performance bonuses of $17.4 million, controls remediation costs of $1.0 million and other expenses of $0.7 million, less tax effects of $5.1 million.

As of June 30, 2020, total cash, cash equivalents and restricted cash was $212 million and bank debt was $29 million.

Fiscal Year 2020 Summary

Net sales for the fiscal year ended June 30, 2020, were $3.34 billion versus $3.50 billion for the fiscal year ended June 30, 2019. Net income for fiscal year 2020 was $84 million, or $1.60 per diluted share, versus $72 million, or $1.39 per diluted share, for fiscal year 2019. Non-GAAP net income for the fiscal year 2020 was $150 million, or $2.77 per diluted share, versus $134 million, or $2.51 per diluted share, for fiscal year 2019. Non-GAAP net income for the fiscal year 2020 adds back stock-based compensation expense of $20.2 million, one-time employee performance bonuses of $27.7 million, legal settlement costs of $17.5 million, controls remediation costs of $13.9 million, and other expenses of $0.7 million, less tax effects of $14.0 million.

Business Outlook and Management Commentary

The Company expects net sales of $720 million to $800 million, GAAP net income per diluted share of $0.03 to $0.27 and non-GAAP net income per diluted share of $0.10 to $0.35 for the first quarter of fiscal year 2021 ending September 30, 2020. The company's projections for GAAP and non-GAAP net income per diluted share both assume a tax rate of approximately 18% and a fully diluted share count of 56.3 million shares. The outlook for Q1 of fiscal year 2021 GAAP net income per diluted share includes approximately $5.0 million in expected stock-based compensation expense, one-time employee performance bonuses and controls remediation expenses, and other expense that are excluded from non-GAAP net income per diluted share.

"Our 5% year-over-year Q4 revenue growth in a very dynamic business environment demonstrates our continuing market engagement in Edge applications and with internet data center customers, both of which grew double-digits year-on-year," said Charles Liang, Chairman and Chief Executive Officer. "We also delivered Q4 non-GAAP EPS that was relatively stable year-on-year despite elevated costs resulting from the impact of COVID-19 on our operations. While our Q1 outlook reflects continued pressures from unprecedented market developments, we are very encouraged as we look to the future, as the digital world continues to progress, evolve, and grow. We are using this period of disruption as an opportunity to invest in long-term growth and optimize our workforce and strategy. A key strategic action we are taking is shifting a greater portion of our operations and R&D to our Taiwan campus, which will result in lower costs. We remain committed to re-accelerating our revenue growth and resuming our long history of market share gain."

Share Repurchase Authorization

The Company also announced today that, its Board of Directors has authorized a stock repurchase program pursuant to which the Company may repurchase up to $30 million of its common stock. The stock repurchase program is effective until December 31, 2020 or until the maximum amount of common stock is repurchased.

"By implementing this stock repurchase program, we can utilize our cash on hand to increase stockholder value while maintaining sufficient cash resources to fund our operations. The stock repurchase program reflects our ongoing commitment to improving the value of our common stock," said Charles Liang, Chairman and CEO of the Company.

Stock repurchases may be made from time to time at prevailing prices in the open market, including pursuant to a Rule 10b5-1 plan. There can be no assurance of how many shares will be repurchased, and the repurchase program may be suspended for periods or discontinued at any time. The timing and amount of any shares repurchased will be determined based on an evaluation of market conditions and other factors. Share repurchases will be funded with cash on hand.

The Company had approximately 52,436,981 shares of common stock outstanding on August 10, 2020.

Conference Call and Webcast Information

The Company will hold a phone conference to answer questions from institutional investors and financial analysts beginning at 2:00 p.m. Pacific Time (PT) on August 11, 2020.

The conference call can be accessed by registering online at: http://www.directeventreg.com/registration/event/1269132

After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes. Registration is open up to the time of the live call, but to ensure connection for the entire call, it is recommended that participants register at least 10 minutes before the start of the call.

The webcast can be accessed by registering online at: https://event.on24.com/wcc/r/2520942/CE280B9580467B7EEFD5180716B005EC

A replay of the webcast will be available shortly after the call for one year at ir.supermicro.com.

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 first quarter of the fiscal year 2021 guidance and 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 March 31, 2020.

Use of Non-GAAP Financial Measures

Non-GAAP gross margin discussed in this press release adds back stock-based compensation expense, one-time employee performance bonuses and other expenses. Non-GAAP operating expenses discussed in this press release adds back stock-based compensation expense, legal settlement costs, one-time employee performance bonuses, other expenses, and controls remediation. Non-GAAP income from operations discussed in this press release adds back stock-based compensation expense, legal settlement costs, one-time employee performance bonuses, other expenses and controls remediation. Non-GAAP diluted net income and non-GAAP net income per common share discussed in this press release adds back stock-based compensation expense, one-time employee performance bonuses, legal settlement costs, other expenses, controls remediation, impairment of investment, and less 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.

Financial Statements are Preliminary

As the Company has not yet finished its year-end annual close procedures, and the audit of its fiscal year 2020 consolidated financial statements is not complete, the anticipated financial information presented in this press release is preliminary, subject to final year-end closing adjustments, and may change materially. The information presented above has not been audited by the Company's independent accountants, should not be considered a substitute for audited financial statements, and should not be regarded as a representation by the Company as to the actual financial results for the fourth quarter of the fiscal year 2020 or the fiscal year ended June 30, 2020.

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)

June 30, June 30,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 210,533 $ 248,164

Accounts receivable, net of allowances 403,745 393,624

Inventories 851,498 670,188

Prepaid expenses and other current assets 126,985 109,795

Total current assets 1,592,761 1,421,771

Investment in equity investee 2,703 1,701

Property, plant and equipment, net 233,785 207,337

Deferred income taxes, net 54,898 41,126

Other assets 34,499 10,659

Total assets $ 1,918,646 $ 1,682,594

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 417,673 $ 360,470

Accrued liabilities 155,401 114,678

Income taxes payable 4,700 13,021

Short-term debt 23,704 23,647

Deferred revenue 106,157 94,153

Total current liabilities 707,635 605,969

Deferred revenue, non-current 97,612 109,266

Long-term debt 5,697 -

Other long-term liabilities 41,995 26,183

Total liabilities 852,939 741,418

Stockholders' equity:



Common stock and Additional Paid In Capital 389,972 349,683

Treasury stock (20,491 ) (20,491 )

Accumulated other comprehensive loss (152 ) (80 )

Retained earnings 696,211 611,903

Total Super Micro Computer, Inc. stockholders' 1,065,540 941,015 equity

Noncontrolling interest 167 161

Total stockholders' equity 1,065,707 941,176

Total liabilities and stockholders' equity $ 1,918,646 $ 1,682,594

SUPER MICRO COMPUTER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended June Years Ended June 30, 30,

2020 2019 2020 2019

Net sales $ 896,126 $ 854,234 $ 3,339,281 $ 3,500,360

Cost of sales 772,609 722,200 2,813,071 3,004,838

Gross profit 123,517 132,034 526,210 495,522

Operating expenses:

Research and 66,748 46,189 221,478 179,907 development

Sales and marketing 21,080 20,691 85,137 77,154

General and 26,261 35,014 133,941 141,228 administrative

Total operating 114,089 101,894 440,556 398,289 expenses

Income from 9,428 30,140 85,654 97,233 operations

Other income (700 ) (1,727 ) 1,410 (1,020 )(expense), net

Interest expense (606 ) (1,210 ) (2,236 ) (6,690 )

Income before income 8,122 27,203 84,828 89,523 tax

Income tax benefit 6,860 (4,344 ) (2,922 ) (14,884 )(provision)

Share of income(loss) from equity 3,468 851 2,402 (2,721 )investee, net oftaxes

Net income $ 18,450 $ 23,710 $ 84,308 $ 71,918

Net income per common share:

Basic $ 0.35 $ 0.47 $ 1.65 $ 1.44

Diluted $ 0.34 $ 0.46 $ 1.60 $ 1.39

Weighted-averageshares used incalculation of net income per commonshare:

Basic 52,240 50,137 50,987 49,917

Diluted 54,218 51,975 52,838 51,716

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

Three Months Ended Years Ended June 30, June 30,

2020 2019 2020 2019

Cost of sales $ 355 $ 407 $ 1,504 $ 1,663

Research and development 2,903 3,165 12,202 12,981

Sales and marketing 404 446 1,680 1,805

General and administrative 1,704 1,085 4,803 4,735

Stock-based compensation expense $ 5,366 $ 5,103 $ 20,189 $ 21,184

SUPER MICRO COMPUTER, INC.

SELECTED CASH FLOW INFORMATION

(in thousands)

(unaudited)

Years Ended June 30,

2020 2019

Net cash provided (used in) by operating activities $ (30,334 ) $ 262,554

Net cash used in investing activities (43,588 ) (24,849 )

Net cash provided (used in) financing activities 23,796 (95,828 )

Effect of exchange rate fluctuations on cash 376 (119 )

Net change in cash equivalents and restricted cash (49,750 ) 141,758

Cash, cash equivalents and restricted cash at the 262,140 120,382 beginning of the period

Cash, cash equivalents and restricted cash at the end $ 212,390 $ 262,140 of the period

SUPER MICRO COMPUTER, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended Twelve Months Ended June 30, June 30,

2020 2019 2020 2019

GAAP GROSS PROFIT $ 123,517 $ 132,034 $ 526,210 $ 495,522

Stock-based compensation 355 407 1,504 1,663

One-time employee 1,201 - 4,072 - performance bonuses

Other expenses 39 - 39 -

Non-GAAP GROSS PROFIT $ 125,112 $ 132,441 $ 531,825 $ 497,185



GAAP GROSS MARGIN 13.8 % 15.5 % 15.8 % 14.2 %

Stock-based compensation 0.0 % 0.0 % 0.0 % 0.0 %

One-time employee 0.2 % 0.0 % 0.1 % 0.0 %performance bonuses

Other expenses 0.0 % 0.0 % 0.0 % 0.0 %

Non-GAAP GROSS MARGIN 14.0 % 15.5 % 15.9 % 14.2 %



GAAP OPERATING EXPENSES $ 114,089 $ 101,894 $ 440,556 $ 398,289

Stock-based compensation (5,011 ) (4,696 ) (18,685 ) (19,521 )

Legal settlement costs - - (17,500 ) -

One-time employee (16,224 ) - (23,682 ) - performance bonuses

Other expenses (638 ) - (638 ) -

Controls remediation (1,004 ) (10,364 ) (13,863 ) (56,917 )

Non-GAAP OPERATING $ 91,212 $ 86,834 $ 366,188 $ 321,851 EXPENSES



GAAP INCOME FROM $ 9,428 $ 30,140 $ 85,654 $ 97,233 OPERATIONS

Stock-based compensation 5,366 5,103 20,189 21,184

Legal settlement costs - - 17,500 -

One-time employee 17,425 - 27,754 - performance bonuses

Other expenses 677 - 677 -

Controls remediation 1,004 10,364 13,863 56,917

Non-GAAP INCOME FROM $ 33,900 $ 45,607 $ 165,637 $ 175,334 OPERATIONS



GAAP NET INCOME $ 18,450 $ 23,710 84,308 $ 71,918

Stock-based compensation 5,366 5,103 20,189 21,184

Legal settlement costs - - 17,500 -

One-time employee 17,425 - 27,754 - performance bonuses

Other expenses 677 - 677 -

Controls remediation 1,004 10,364 13,863 56,917

Impairment of investment - 2,000 - 2,661

Adjustments to tax (5,101 ) (4,133 ) (13,969 ) (19,110 )provision

Non-GAAP NET INCOME $ 37,821 $ 37,044 $ 150,322 $ 133,570



GAAP NET INCOME PER $ 0.35 $ 0.47 $ 1.65 $ 1.44 COMMON SHARE - BASIC

Impact of Non-GAAP 0.37 0.27 1.30 1.24 adjustments

Non-GAAP NET INCOME PER $ 0.72 $ 0.74 $ 2.95 $ 2.68 COMMON SHARE - BASIC



GAAP NET INCOME PER $ 0.34 $ 0.46 $ 1.60 $ 1.39 COMMON SHARE - DILUTED

Impact of Non-GAAP 0.34 0.23 1.17 1.12 adjustments

Non-GAAP NET INCOME PER $ 0.68 $ 0.69 $ 2.77 $ 2.51 COMMON SHARE - DILUTED



WEIGHTED-AVERAGE SHARESUSED IN COMPUTING NET INCOME PER COMMON SHARE



BASIC - GAAP 52,240 50,137 50,987 49,917

BASIC - Non-GAAP 52,240 50,137 50,987 49,917



DILUTED - GAAP 54,218 51,975 52,838 51,716

DILUTED - Non-GAAP 55,595 53,431 54,317 53,127

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CONTACT: Investor Relations Contact: James Kisner Vice President, Investor Relations (669) 284-1259 email: ir@supermicro.com