Super Micro Computer (NASDAQ:SMCI)

Second Quarter 2012 Results

• Quarterly net sales of $249.9 million, up 0.8% from the first quarter of fiscal year 2012 and up 3.8% from the same quarter of last year.
• Net income of $8.8 million, up 3.3% from the first quarter of fiscal year 2012 and down 24.2% from the same quarter of last year.
• Gross margin of 17.1%, up from 16.0% in the first quarter of fiscal year 2012 and up 0.4% from the same quarter of last year.
• Server Solutions accounted for 44.0% of net sales compared with 39.4% in the first quarter of fiscal year 2012 and 40.5% in the same quarter of last year.

The Company expects net sales of $240 million to $270 million for the third quarter of fiscal year 2012 ending March 31, 2012. The Company expects non-GAAP earnings per diluted share of approximately $0.19 to $0.27 for the third quarter.

"We've previously said that the third fiscal quarter was challenging principally due to impact on the hard disk drive supply chain resulting from the flooding in Thailand. We are continuing to work with our vendors to recover hard disk drive supplies that will help us meet the strong growing demand for our products," said Charles Liang, CEO of Supermicro. "2012 will be a significant year to us due to the coming launch of Sandy Bridge. During the quarter, we continued our R&D investment to be able to offer the broadest product offering in the industry for the Sandybridge launch. Also, we opened our new Taiwan facility which will increase our efficiency and lower the cost to deliver products to our customers. Backlog for our products is high. We are confident that our new product architectures including Fat Twin and full digital power subsystem and expansion of our production will provide broad opportunity for us in the coming quarters."

• Quarterly net sales of $247.9 million, down 4.8% from the fourth quarter of fiscal year 2011 and up 19.6% from the same quarter of last year.
• Gross margin of 16.0%, up from 15.4% in the fourth quarter of fiscal year 2011 and up 0.1% from the same quarter of last year.
• Server Solutions accounted for 39.4% of net sales compared with 40.4% in the fourth quarter of fiscal year 2011 and 35.7% in the same quarter of last year.
• Net income for the first quarter of fiscal year 2012 was $8.5 million or $0.19 per diluted share, an increase of 17.7% from the net income of $7.2 million, or $0.17 per diluted share in the same period a year ago. Included in net income for the quarter is $2.3 million of stock-based compensation expense (pre-tax).
• Excluding this item and the related tax effect, non-GAAP net income for the first quarter was $10.5 million, or $0.24 per diluted share, compared to non-GAAP net income of $9.3 million, or $0.22 per diluted share, in the same quarter of the prior year. On a sequential basis, non-GAAP net income decreased from the fourth quarter of fiscal year 2011 by $2.5 million or $0.05 per diluted share.

Business Outlook & Management Commentary

• The Company expects net sales of $260 million to $280 million for the second quarter of fiscal year 2012 ending December 31, 2011.
• The Company expects non-GAAP earnings per diluted share of approximately $0.27 to $0.33 for the second quarter.

“Supermicro had a strong beginning to our new fiscal year with first quarter revenues 19.6% higher than last year. We continued to have strong system business as our growing customers like total solutions from Supermicro,” said Charles Liang, Chairman and CEO. “This quarter was one of further developing our foundation by preparing our product lines for Sandy Bridge processor and by improving our production capacity and logistics as our Taiwan facility nears completion.”

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.

Third Quarter Results:

• 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.
• 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
• 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."

SMCI EPS grew 250.0% yet the stock was pummeled. In addition to only slightly exceeding analyst estimates, we believe that the problem might have to do with two reasons:

    -EPS guidance for its next quarter is one penny shy of estimates.
    -The company has commented it is not issuing guidance for 2011 yet.
   
Regardless, comments were strong.

The Company expects net sales of $192 million to $202 million for the fourth quarter of fiscal year 2010 ending June 30, 2010. This quarter we have a good boost because of the new product transition which started last quarter. In addition, this is historically a strong seasonal quarter; the Company expects non-GAAP earnings per diluted share of approximately $0.20 to $0.23 for the fourth quarter.

“We achieved another record high of quarterly revenues, which is the 4th straight quarter of increasing revenues, making the first 9 months of fiscal 2010 the strongest performance in our history. Supermicro has strong momentum going into the June quarter because of our growing brand strength, important OEM wins, new Westmere and G34 product launches, and growing revenue opportunities in Europe and Asia. Our global expansion to meet our worldwide demand now includes production capacity in Europe as well as our first production in Taiwan, which was added during the quarter. We expect our strong growth trend to continue into the June quarter and beyond,” said Charles Liang, CEO and President.

It is currently expected that the outlook will not be updated until the Company’s next quarterly earnings announcement, notwithstanding subsequent developments. 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.