01—Abstract
Summary
Summary of the 10-K filed September 10, 2015. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. (SMCI) reported fiscal year 2015 (ended June 30, 2015) net sales of $1,991.2 milliona, up from $1,467.2 million in fiscal 2014 and $1,162.6 million in fiscal 2013, and net income of $101.9 million, up from $54.2 million.
Gross profit rose to $320.2 millionb, with gross margin of 16.1% versus 15.4% in fiscal 2014. Growth was driven mainly by complete server systems, which rose to 60.9% of net sales from 50.5%, with server systems net sales up 63.8% to $1,213.6 million. Diluted EPS was $2.03, compared with $1.16 in fiscal 2014.
Cash generation weakened sharply. Operating cash flow was negative $44.6 millionc, versus positive $6.5 million in fiscal 2014. The company cited a $153.6 million inventory build and a $110.2 million increase in accounts receivable.
Inventory rose to $463.5 milliond from $315.8 million, DSO increased to 48 days from 44, and total debt reached $94.4 million, up from $46.3 million, largely from bank line-of-credit borrowings. Purchase commitments were $378.3 million, including $185.7 million of hard disk drive commitments. Concentration and related-party exposure remain significant.
One customer, SoftLayer (a division of IBM), accounted for 10.1% of net sales. Ablecom Technology, a related party controlled in part by the CEO's family, supplied 13.6% of cost of sales, and the auditor's report notes significant related-party transactions. Management reported internal control over financial reporting as effective as of June 30, 2015.
02—Key points
Key Highlights
- Net sales rose to $1,991.2 million in fiscal 2015 from $1,467.2 million, and net income rose to $101.9 million from $54.2 million.
- Gross margin improved to 16.1% from 15.4%, with gross profit of $320.2 million.
- Complete server systems grew to 60.9% of net sales from 50.5%, and average selling prices of server systems rose 39.3%.
- Operating cash flow was negative $44.6 million, compared with positive $6.5 million in fiscal 2014, driven by a $153.6 million inventory increase.
- Inventory reached $463.5 million and DSO rose to 48 days from 44, while total debt increased to $94.4 million from $46.3 million.
- One customer, SoftLayer (IBM), accounted for 10.1% of net sales; related-party supplier Ablecom accounted for 13.6% of cost of sales.
- Hard disk drive purchase commitments of $185.7 million are due through December 2016, and total purchase commitments were $378.3 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Super Micro Computer kept $0.05.
- Revenue$1.95B100.0%
- Cost of revenue−$1.65B84.3%
- Gross profit$306.6M15.7%
- Operating costs−$173.9M8.9%
- Operating income$132.6M6.8%
- Interest, other & tax−$40.1M2.1%
- Net income$92.6M4.7%
Where FY2015 revenue went
$1.95B- Cost of revenue: $1.65B, 84% of revenue
- Net income: $92.6M, 4.7% of revenue
- R&D: $101.4M, 5.2% of revenue
- Other operating costs: $72.5M, 3.7% of revenue
- Interest, other & tax: $40.1M, 2.1% of revenue
Kept 4.7% as net incomeNet income $92.6M · 4.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed September 10, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.95B$1.47B | +33.2% |
| Cost of Revenue | $1.65B$1.24B | +32.7% |
| Gross Profit | $306.58M$225.54M | +35.9% |
| R&D Expenses | $101.40M$84.26M | +20.3% |
| Operating Expenses | $173.94M$145.29M | +19.7% |
| Operating Income | $132.65M$80.26M | +65.3% |
| Interest Expense | $965K$757K | +27.5% |
| Net Income | $92.56M$54.16M | +70.9% |
| EPS (Basic) | $1.99$1.24 | +60.5% |
| EPS (Diluted) | $1.85$1.16 | +59.5% |
| Shares Outstanding (Basic) | 46.43M43.60M | +6.5% |
| Shares Outstanding (Diluted) | 50.09M46.51M | +7.7% |
05—Questions
Frequently Asked Questions
How did Super Micro's revenue and profitability change in fiscal 2015?
Net sales increased to $1,991.2 million from $1,467.2 million, and net income increased to $101.9 million from $54.2 million. Diluted EPS was $2.03 versus $1.16. The filing attributes the increase mainly to higher sales of complete server systems and higher gross margin.
Why was operating cash flow negative in fiscal 2015?
The filing reports operating cash flow of $(44.6) million, primarily due to a $153.6 million increase in inventory and a $110.2 million increase in accounts receivable, partially offset by net income, a $75.5 million increase in accounts payable, and stock-based compensation. Management attributes the inventory build to supporting anticipated growth in fiscal 2016.
How concentrated is Super Micro's customer and supplier base?
One customer, SoftLayer, a division of IBM, represented 10.1% of fiscal 2015 net sales, and no customer exceeded 10% in fiscal 2014 or 2013. The top supplier accounted for 28.7% of total purchases, and related party Ablecom accounted for 12.6% of total purchases.
What related-party risks does the filing disclose?
Ablecom Technology, a major contract manufacturer, is a related party. CEO Charles Liang's brother, Steve Liang, is Ablecom's CEO, and Charles Liang and his spouse jointly own 10.5% of Ablecom. Purchases from Ablecom were $227.6 million in fiscal 2015, and sales to Ablecom were $58.0 million. The filing states that these relationships could affect contract terms.
What debt and liquidity obligations did the company have at June 30, 2015?
Total debt was $94.4 million, including $69.4 million under lines of credit and $25.0 million in building term loans. Of this, $93.5 million was classified as current. Cash and cash equivalents were $95.4 million. The company stated it had sufficient cash for at least the next 12 months.
06—Continue