01—Abstract
Summary
Summary of the 10-K filed September 13, 2012. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. reported fiscal year 2012 (ended June 30, 2012) net sales of $1,013.9 milliona, up from $942.6 million in fiscal 2011, and net income of $29.9 million, down from $40.2 million.
The filing attributes the net sales increase primarily to higher server system sales, with the average selling price of server system units rising 18.8% to $1,900,b while subsystems and accessories sales declined 4.1%. Gross profit rose to $165.4 million, but operating expenses grew to $119.4 million, led by research and development expense of $64.2 million (up 33.5%), which the company tied to Sandy Bridge product launches and FatTwin costs. Income from operations fell to $46.0 million from $58.7 million.
The company said the Thailand flooding disrupted hard disk drive supply, and it entered purchase agreements for hard disk drives totaling approximately $223.4 millionc, which drove total purchase commitments to $355.6 million, up from $91.8 million a year earlier. Balance sheet and liquidity were stronger at year-end. Cash and cash equivalents were $80.8 million, inventory rose to $276.6 million from $192.7 million, and total assets reached $589.1 million.
Operating cash flow was $16.5 milliond, and management stated it had sufficient cash to operate for at least the next 12 months. Total debt, including short-term debt, was $32.8 million. Stockholders' equity increased to $338.4 million.
Days sales of inventory rose to 100 days from 75 days. The filing also highlights significant related-party exposure. Ablecom Technology Inc., a Taiwan contract manufacturer whose owners include the CEO's family, accounted for 19.9% of cost of sales, and purchases from Ablecom totaled $168.7 million.
Customers outside the United States represented 41.8% of net sales. The company reported no customer at 10% or more of net sales.
02—Key points
Key Highlights
- Net sales rose to $1,013.9 million from $942.6 million, driven mainly by server systems, where sales increased 27.2% and represented 44.1% of net sales.
- Net income declined to $29.9 million from $40.2 million, as R&D expense increased 33.5% to $64.2 million and income from operations fell to $46.0 million from $58.7 million.
- Gross profit increased to $165.4 million, with gross margin at 16.3% of net sales compared with 16.0% in fiscal 2011.
- Inventory increased to $276.6 million (100 days of inventory) from $192.7 million, partly due to Sandy Bridge processor launch inventory and hard disk drive purchases after the Thailand flooding.
- Purchase commitments rose to $355.6 million from $91.8 million, primarily from hard disk drive supply agreements totaling approximately $223.4 million payable through March 2014.
- Ablecom Technology Inc., a related-party contract manufacturer controlled in part by the CEO's family, accounted for 19.9% of cost of sales in fiscal 2012.
- Management stated cash and cash equivalents of $80.8 million and sufficient cash to operate for at least the next 12 months, with total debt of $32.8 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Super Micro Computer kept $0.03.
- Revenue$1.01B100.0%
- Cost of revenue−$848.5M83.7%
- Gross profit$165.4M16.3%
- Operating costs−$119.4M11.8%
- Operating income$46.0M4.5%
- Interest, other & tax−$16.2M1.6%
- Net income$29.9M2.9%
Where FY2012 revenue went
$1.01B- Cost of revenue: $848.5M, 84% of revenue
- Net income: $29.9M, 2.9% of revenue
- R&D: $64.2M, 6.3% of revenue
- Other operating costs: $55.2M, 5.4% of revenue
- Interest, other & tax: $16.2M, 1.6% of revenue
Kept 2.9% as net incomeNet income $29.9M · 2.9%Interest, other & tax $16.2M · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed September 13, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $1.01B$942.58M | +7.6% |
| Cost of Revenue | $848.46M$791.48M | +7.2% |
| Gross Profit | $165.42M$151.10M | +9.5% |
| R&D Expenses | $64.22M$48.11M | +33.5% |
| Operating Expenses | $119.40M$92.41M | +29.2% |
| Operating Income | $46.01M$58.69M | −21.6% |
| Interest Expense | $717K$686K | +4.5% |
| Net Income | $29.85M$40.21M | −25.8% |
| EPS (Basic) | $0.72$1.04 | −30.8% |
| EPS (Diluted) | $0.67$0.93 | −28.0% |
| Shares Outstanding (Basic) | 40.89M38.13M | +7.2% |
| Shares Outstanding (Diluted) | 44.15M42.40M | +4.1% |
05—Questions
Frequently Asked Questions
What drove the revenue growth in fiscal 2012?
The filing attributes the increase in net sales primarily to higher average selling prices and unit volumes of server systems. Server system units rose 8.1% to 239,000, and the average selling price rose 18.8% to $1,900, partly due to higher hard disk drive prices caused by the Thailand flooding. Subsystems and accessories sales declined 4.1%.
Why did net income decline despite higher sales?
The company attributed the decline in profitability primarily to higher research and development costs for new products tied to Intel's Sandy Bridge processors, costs for the FatTwin launch, and expansion costs overseas and in the United States. Gross profit growth partly offset these increases.
How did the Thailand flooding affect the business?
The filing states that the flooding disrupted the hard disk drive supply chain, which reduced fiscal 2012 sales of subsystems such as memory and serverboards. The company entered purchase agreements with hard disk drive suppliers in the third quarter of fiscal 2012, with commitments totaling approximately $223.4 million through March 2014.
How significant is the relationship with Ablecom Technology?
Ablecom is a related party. Purchases from Ablecom totaled $168.7 million in fiscal 2012, representing 19.9% of cost of sales. The CEO's brother runs Ablecom, and Charles Liang and his spouse own 10.5% of Ablecom. The filing notes that conflicts of interest could arise and that terms may be less favorable than arm's-length arrangements.
Does the company have enough liquidity to fund its operations?
Management stated it has sufficient cash on hand to continue operating for at least the next 12 months. Cash and cash equivalents were $80.8 million at June 30, 2012, and the company had an unused revolving line of credit of $29.4 million under its Bank of America facility. Operating cash flow was $16.5 million, while inventory and receivables grew.
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