01—Abstract
Summary
Summary of the 10-K filed August 29, 2022. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. (Supermicro) reported fiscal year 2022 (ended June 30, 2022) net sales of $5.20 billiona, up 46.1% from $3.56 billion in fiscal 2021, with net income of $285.2 million versus $111.9 million a year earlier.
Gross margin rose to 15.4% from 15.0%, while operating expenses grew 13.2% to $464.8 millionb, and income from operations reached $335.2 million, or 6.5% of revenue. Server and storage systems made up 85.9% of net sales, and the company stated that management attributed the sales increase to higher average selling prices per compute node and more units shipped. The balance sheet and cash flow show the pressure of growth.
Inventories rose to $1.55 billion and accounts receivable to $834.5 millionc, and operating activities used $440.8 million of cash. To fund this, total debt increased to $596.8 million from $98.2 million, with $449.1 million classified as short-term, and the company describes multiple Taiwan and U.S. credit facilities, including a $132 million Cathay Bank line of credit. Cash and cash equivalents ended the year at $267.4 million.
The filing also highlights governance and risk items for investors. Related-party dealings with Ablecom and Compuware are significant, representing 8.3% of cost of sales, and the CEO, Charles Liang, holds a performance-based option award tied to revenue and stock price milestones. The company disclosed a $200 milliond share repurchase program approved on August 3, 2022, and reported that Deloitte & Touche LLP issued an unqualified opinion on internal control over financial reporting.
02—Key points
Key Highlights
- Net sales rose to $5,196.1 million in fiscal 2022, a 46.1% increase from $3,557.4 million in fiscal 2021.
- Net income increased to $285.2 million from $111.9 million, and the net margin was 5.6% versus 3.1% in the prior year.
- Server and storage systems were 85.9% of net sales in fiscal 2022, up from 78.4% in fiscal 2021.
- Gross margin improved to 15.4% from 15.0%, while operating expenses rose 13.2% to $464.8 million.
- Operating cash flow was negative $440.8 million, driven by higher inventories ($1,545.6 million) and accounts receivable ($834.5 million).
- Total debt grew to $596.8 million from $98.2 million, with $449.1 million due within one year, and cash ended at $267.4 million.
- A new $200 million share repurchase program was approved on August 3, 2022, following expiry of the prior program with $150.0 million of availability remaining at June 30, 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Super Micro Computer kept $0.05.
- Revenue$5.20B100.0%
- Cost of revenue−$4.40B84.6%
- Gross profit$800.0M15.4%
- Operating costs−$464.8M8.9%
- Operating income$335.2M6.5%
- Interest, other & tax−$50.0M1.0%
- Net income$285.2M5.5%
Where FY2022 revenue went
$5.20B- Cost of revenue: $4.40B, 85% of revenue
- Net income: $285.2M, 5.5% of revenue
- R&D: $272.3M, 5.2% of revenue
- Other operating costs: $192.6M, 3.7% of revenue
- Interest, other & tax: $50.0M, 1.0% of revenue
Kept 5.5% as net incomeNet income $285.2M · 5.5%Interest, other & tax $50.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed August 29, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $5.20B$3.56B | +46.1% |
| Cost of Revenue | $4.40B$3.02B | +45.4% |
| Gross Profit | $800.00M$534.54M | +49.7% |
| R&D Expenses | $272.27M$224.37M | +21.4% |
| Operating Expenses | $464.83M$410.59M | +13.2% |
| Operating Income | $335.17M$123.95M | +170.4% |
| Interest Expense | $6.41M$2.48M | +158.1% |
| Net Income | $285.16M$111.86M | +154.9% |
| EPS (Basic) | $0.55$2.19 | −74.9% |
| EPS (Diluted) | $0.53$2.09 | −74.6% |
| Shares Outstanding (Basic) | 514.78M51.16M | +906.3% |
| Shares Outstanding (Diluted) | 536.15M53.51M | +902.0% |
05—Questions
Frequently Asked Questions
What drove the large increase in revenue in fiscal 2022?
The filing attributes the increase in server and storage systems revenue, which rose $1,673.5 million or 60.0%, primarily to higher average selling prices per compute node (approximately 32%) and an approximately 23% increase in compute nodes sold, particularly from large enterprise and datacenter customers.
Why was operating cash flow negative despite higher net income?
Management attributes the $440.8 million cash outflow mainly to a $739.6 million increase in net working capital needs, including inventory build-up to mitigate supply chain risk and higher accounts receivable, offset partly by net income of $285.2 million.
How is the company financing its growth?
Borrowings rose sharply, with proceeds from borrowings of $1,153.3 million in fiscal 2022 against repayments of $640.7 million. The company expanded several bank facilities, including a Bank of America credit facility increased to $350 million and a new $132 million Cathay Bank revolving line.
Are there concentration or related-party risks investors should note?
Yes. Two suppliers accounted for 18.1% and 11.4% of total purchases in fiscal 2022, and purchases from related parties Ablecom and Compuware represented 8.3% of cost of sales. The CEO's family members hold ownership interests in these companies, and the company says these arrangements may not be as favorable as arm's-length terms.
What is the status of the CEO's performance award and the share repurchase program?
The CEO's 2021 performance option covers 1,000,000 shares at $45.00, with the first 200,000-share tranche earned after the $4.0 billion revenue and $45 stock price goals were achieved. The new $200 million repurchase program runs until January 31, 2024, and no shares were repurchased under the prior program during fiscal 2022.
06—Continue