You might also like
Super Micro Computer, Inc. (SMCI) is a Silicon Valley-based company specializing in accelerated compute platforms, providing high-performance and high-efficiency server and storage systems tailored for various markets such as enterprise data centers, cloud computing, artificial intelligence, 5G, and edge computing . The company offers a wide range of products under its Total IT Solutions, including complete servers, storage systems, and modular blade servers, emphasizing flexibility and customization to meet diverse computing needs . Server and storage systems are the primary revenue drivers, with subsystems and accessories also contributing to the company's sales .
- Server and Storage Systems - Offers high-performance and high-efficiency servers and storage solutions optimized for enterprise data centers, cloud computing, AI, 5G, and edge computing.
- Subsystems and Accessories - Provides server boards, chassis, and accessories that complement the main server and storage offerings.
- Modular Blade Servers - Delivers flexible and scalable blade server solutions for various computing environments.
- Blades - Supplies individual blade components for integration into modular server systems.
- Workstations - Designs high-performance workstations for professional and enterprise use.
- Full Rack Scale Solutions - Provides comprehensive rack-scale solutions for large-scale data center deployments.
- Networking Devices - Offers networking hardware to support server and storage connectivity.
- Server Sub-Systems - Supplies essential components for server assembly and customization.
- Server Management and Security Software - Develops software solutions for managing and securing server operations.
What went well
- Strong growth in liquid cooling solutions, with over 2,000 liquid-cooled racks shipped in recent months . Customer feedback is very positive, with quality and satisfaction even better than traditional solutions . Supermicro's investment in liquid cooling over the past three years is paying off, providing a major advantage in end-to-end data center solutions .
- Robust partnership with NVIDIA, with a relationship spanning multiple decades . Supermicro expects no negative impacts on supply or allocations from NVIDIA due to auditor issues, and communication remains very positive . As NVIDIA's new chips become available, Supermicro anticipates a good percentage in their product mix, enhancing growth prospects .
- Financial strength and access to capital, having raised $4 billion into working capital from two equity raises and one convertible in the last 8-9 months . Supermicro exited Q4 at a run rate of around $6 billion . The company continues to make a reasonable good net profit every quarter, leaving them in good shape with no impediments to raising working capital .
What went wrong
- High Inventory Levels Pose Financial Risk: The company reported holding $5 billion in inventory and expects to maintain this level as it continues to grow . If demand slows, this high inventory could lead to financial strain due to potential write-downs or cash flow issues.
- Uncertainty from Delayed Auditor Appointment and Lack of Annual Guidance: The company has not provided an update on appointing a new auditor, stating, "we have no update with respect to the time line" . Additionally, they are not providing annual guidance for fiscal year 2025, which may create uncertainty about future performance .
- Corporate Governance Concerns Over Combined CEO and Chairman Roles: Analysts have expressed that separating the CEO and Chairman roles could benefit the company. The CEO acknowledged the consideration but offered "no comment at this moment" on plans to separate the roles, potentially indicating governance risks .
Q&A Summary
-
Revenue Guidance & Chip Availability
Q: When will Blackwell revenue start impacting guidance?
A: Charles Liang explained revenue was impacted as customers await new chips, particularly NVIDIA's Blackwell. They expect growth once these chips become available, possibly starting in Q1 as volumes improve. However, they are not providing annual guidance currently. -
Gross Margin Outlook
Q: Will gross margins improve this fiscal year?
A: Management is cautiously guiding margins but aims to improve them despite competitive pressures. With new technologies like Blackwell, they are optimistic about growing margins toward their target of 14–17%. -
Financial Filings & Auditor Status
Q: What's the status of audited filings and auditor replacement?
A: The company is diligently working to replace their auditor and will file a plan with NASDAQ for an extension. They have no updates on the timeline but are focused on resolving the issue promptly. -
Inventory Levels & Cash Flow
Q: How are inventory levels affecting cash flow?
A: Inventory remains high at $5 billion to support anticipated growth. As growth normalizes, they expect improved cash flow, evidenced by an improved operating cash flow of about $1 billion this quarter, driven by better working capital management. -
Management Changes
Q: Any plans for management or operational changes?
A: Charles Liang stated they continuously add senior management as the company grows rapidly. They are open to changes benefiting shareholders, including possibly separating Chairman and CEO roles in the future. -
Customer Concentration
Q: Are there significant 10% customer exposures?
A: The company acknowledged having 10% customers but did not disclose specifics. They are gaining new customers, especially in Europe and Asia, to maintain a healthy customer mix. -
Relationship with NVIDIA
Q: Is NVIDIA supply affected by filing issues?
A: Charles Liang affirmed their strong, decades-long relationship with NVIDIA, expecting no negative impact on allocations. NVIDIA confirmed no changes, and they continue close collaboration on new technologies. -
Capacity Utilization
Q: How is capacity utilization tracking?
A: They have expanded capacity in Silicon Valley, Taiwan, and Malaysia to support future growth. Currently, utilization is about 50%, awaiting new chip availability, but they are prepared for increased demand. -
Access to Capital
Q: How should we view your access to capital?
A: With strong profitability, they raised $4 billion in the past 8–9 months, ensuring good working capital. They foresee no impediments to raising additional capital if needed. -
Liquid Cooling Solutions
Q: Is there more efficiency in liquid cooling supply chain?
A: They are ahead in liquid cooling, having shipped over 2,000 racks with positive customer feedback. They expect liquid cooling to continue growing rapidly and remain a major advantage.
Guidance Changes
Quarterly guidance for Q2 2025:
- Net Sales: $5.5B to $6.1B (lowered from $6B to $7B )
- Gross Margin: Decrease by 100 basis points sequentially (lowered from “expected improvement” )
- Operating Expenses: Increase by approximately $34M sequentially (raised from $282M )
- Other Income and Expense: Net expense of approximately $7M (lowered from net expense of approximately $20M )
- GAAP Net Income per Diluted Share: $0.48 to $0.58 (lowered from $5.97 to $7.66 )
- Non-GAAP Net Income per Diluted Share: $0.56 to $0.65 (lowered from $6.69 to $8.27 )
- Tax Rate: GAAP 14%, Non-GAAP 15% (raised from GAAP 9.9%, Non-GAAP 14.6% )
- Diluted Share Count: GAAP 640M, Non-GAAP 648M (raised from GAAP 65M, Non-GAAP 66M )
- Stock-Based Compensation Expense: $54M, with $14M excluded from non-GAAP net income per share (lowered from $84M )
- Given the resignation of your independent auditor and the delay in filing your 10-K, are you experiencing any market share losses or customer hesitancy due to these issues, and how are you mitigating potential impacts on your business?
- Can you provide more specifics on the initial concerns raised by your previous auditor that prompted the special committee's investigation, and what remedial measures are being implemented to strengthen your internal governance and oversight functions?
- With the delays in providing audited financial statements, what are the risks associated with your credit agreements if you fail to meet the new deadlines, and could this impact your access to capital markets or trigger covenants in your convertible debt?
- You previously gave full-year revenue guidance of $26 billion to $30 billion but did not reaffirm it on this call; do you still stand by this outlook, and what key factors could affect your ability to achieve these targets?
- Your gross margin is expected to contract in the upcoming quarter; is this a result of increased competition or pricing pressures, and what strategies are you employing to sustain or improve profitability amidst these challenges?
Q1 2025 Earnings Call
- Issued Period: Q1 2025
- Guided Period: Q2 2025
- Guidance:
- Net Sales: $5.5 billion to $6.1 billion .
- Gross Margin: Decrease by 100 basis points sequentially .
- Operating Expenses: Increase by approximately $34 million sequentially .
- Other Income and Expense: Net expense of approximately $7 million .
- GAAP Net Income per Diluted Share: $0.48 to $0.58 .
- Non-GAAP Net Income per Diluted Share: $0.56 to $0.65 .
- Tax Rate: GAAP 14%, Non-GAAP 15% .
- Diluted Share Count: GAAP 640 million, Non-GAAP 648 million .
- Stock-Based Compensation Expense: $54 million, with $14 million excluded from non-GAAP net income per diluted share .
Q4 2024 Earnings Call
- Issued Period: Q4 2024
- Guided Period: Q1 2025 and FY 2025
- Guidance:
- Q1 2025:
- Net Sales: $6 billion to $7 billion .
- GAAP Diluted Net Income per Share: $5.97 to $7.66 .
- Non-GAAP Diluted Net Income per Share: $6.69 to $8.27 .
- Gross Margin: Expected improvement .
- Operating Expenses: GAAP $282 million, including $84 million in stock-based compensation .
- Tax Rate: GAAP 9.9%, Non-GAAP 14.6% .
- Fully Diluted Share Count: GAAP 65 million, Non-GAAP 66 million .
- CapEx: $45 million to $55 million .
- Other Income and Expenses: Net expense of approximately $20 million .
- FY 2025:
- Revenue: $26 billion to $30 billion .
- Q1 2025:
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Q4 2024:
- Net Sales: $5.1 billion to $5.5 billion .
- GAAP Diluted Net Income per Share: $7.20 to $8.05 .
- Non-GAAP Diluted Net Income per Share: $7.62 to $8.42 .
- Gross Margins: Expected to decrease .
- GAAP Operating Expenses: $226 million, including $55 million in stock-based compensation .
- Other Income and Expenses: Net expense of approximately $8 million .
- Tax Rate: GAAP -2.9%, Non-GAAP 2.6% .
- Fully Diluted Share Count: GAAP 64.8 million, Non-GAAP 65.3 million .
- CapEx: $55 million to $65 million .
- FY 2024:
- Revenues: $14.7 billion to $15.1 billion .
- GAAP Net Income per Diluted Share: $21.61 to $22.46 .
- Non-GAAP Net Income per Diluted Share: $23.29 to $24.09 .
- Tax Rate: GAAP 3.6%, Non-GAAP 9.2% .
- Fully Diluted Share Count: GAAP 61.2 million, Non-GAAP 61.8 million .
- Q4 2024:
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024 and FY 2024
- Guidance:
- Q3 2024:
- Net Sales: $3.7 billion to $4.1 billion .
- GAAP Diluted Net Income per Share: $4.79 to $5.64 .
- Non-GAAP Diluted Net Income per Share: $5.20 to $6.01 .
- Gross Margins: Expected to be slightly lower .
- GAAP Operating Expenses: $201 million, including $39 million in stock-based compensation .
- Other Income and Expenses: Net expense of approximately $9 million .
- Tax Rate: GAAP 13.8%, Non-GAAP 15.8% .
- CapEx: $18 million to $21 million .
- Fully Diluted Share Count: GAAP 60.1 million, Non-GAAP 61 million .
- FY 2024:
- Revenue: $14.3 billion to $14.7 billion .
- CapEx: $105 million to $115 million .
- Q3 2024:
Competitors mentioned in the company's latest 10K filing.
- Cisco: Global technology vendor .
- Dell: Global technology vendor .
- Hewlett-Packard Enterprise: Global technology vendor .
- Lenovo: Global technology vendor .
- Foxconn: ODM (Original Design Manufacturer) .
- Quanta Computer: ODM .
- Wiwynn Corporation: ODM .
- Inspur: OEM (Original Equipment Manufacturer) .
Recent developments and announcements about SMCI.
Financial Actions
Debt Issuance
Super Micro Computer, Inc. (SMCI) has recently entered into significant financial agreements that may impact its financial health.
On November 14, 2024, SMCI's subsidiary in Taiwan amended its credit agreements with E.SUN Bank. These amendments include financial commitments related to the current ratio, net debt ratio, and interest coverage multiple. Failure to meet these commitments could result in a shortened amortization period for current balances, potentially affecting the company's cash flow and financial stability .
Additionally, on November 15, 2024, SMCI entered into a Fourth Amendment to its Loan Agreement with Cathay Bank. This amendment reduces the revolving line and letter of credit sublimit to $458,000, which may limit the company's liquidity and financial flexibility .
These financial obligations and amendments could have significant implications for SMCI's balance sheet and overall financial health, depending on the company's ability to meet the specified financial commitments and manage its reduced credit facilities.
Dividend Policy
Super Micro Computer, Inc. (SMCI) has announced a significant change in its dividend policy. On December 5, 2023, the company completed the sale and issuance of 2,315,105 shares of Common Stock, resulting in net proceeds of approximately $582.9 million. This move is part of a broader financial strategy, although specific details on dividend changes were not disclosed in the announcement .
Financial Reporting
Auditor Changes
Super Micro Computer, Inc. (SMCI) Auditor Change
On November 18, 2024, Super Micro Computer, Inc. announced the appointment of BDO USA, P.C. as its new independent auditor. This change was made by the Audit Committee of the Board of Directors and is effective immediately. BDO USA is part of BDO International, a top global accounting network. This move is part of Supermicro's efforts to bring its financial statements current and comply with Nasdaq listing requirements .