01—Abstract
Summary
Summary of the 10-Q filed February 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. reported its second quarter of fiscal 2024 (three and six months ended December 31, 2023) in this Form 10-Q.
Net sales for the quarter were $3.66 billiona, up 103.2% from $1.80 billion a year earlier, and for the six months were $5.78 billion, up 58.3% from $3.66 billion. Gross margin fell to 15.4% from 18.7% in the prior-year quarter, while net income rose to $295.97 million from $176.17 million. Diluted EPS was $5.10 versus $3.14.
Growth was attributed mainly to strong demand for GPU, high performance computing, and rack-scale solutions from data center customers, which carry higher average selling prices. The balance sheet expanded considerably. Inventories rose to $2.47 billionb from $1.45 billion at June 30, 2023, and accounts receivable rose to $1.50 billion.
Operating cash flow was negative $324.6 millionc for the six months, compared with positive $474.7 million a year earlier, driven by a $945.1 million increase in net working capital. The company raised $582.8 million in net proceeds from a December 2023 public offering of 2,315,105 shares at $262.00 per share. Total debt was $375.6 million, and cash and cash equivalents were $725.7 million.
Subsequent events include an agreement to buy real estate in San Jose, California for $80.0 milliond, expected to close in the third quarter of fiscal 2024, and a lease of approximately 260,000 square feet in San Jose for 79 months at about $0.6 million per month. Two customers accounted for 25.5% and 10.4% of net sales in the quarter, and one supplier accounted for 68.1% of total purchases.
02—Key points
Key Highlights
- Net sales of $3.66 billion in the three months ended December 31, 2023, up 103.2% year over year; six-month net sales of $5.78 billion, up 58.3%.
- Gross margin declined to 15.4% from 18.7% in the prior-year quarter, attributed to product and customer mix.
- Net income of $295.97 million for the quarter versus $176.17 million; diluted EPS of $5.10 versus $3.14.
- Operating cash flow was negative $324.6 million for the six months, reflecting a $945.1 million increase in net working capital, including inventory up $1,145.2 million.
- Inventories reached $2.47 billion at December 31, 2023, up from $1.45 billion at June 30, 2023.
- Raised $582.8 million in net proceeds from a December 5, 2023 public offering at $262.00 per share.
- Customer and supplier concentration: two customers accounted for 25.5% and 10.4% of quarterly net sales, and one supplier accounted for 68.1% of quarterly purchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Super Micro Computer kept $0.08.
- Revenue$3.66B100.0%
- Cost of revenue−$3.10B84.6%
- Gross profit$564.3M15.4%
- Operating costs−$192.9M5.3%
- Operating income$371.5M10.1%
- Interest, other & tax−$75.5M2.1%
- Net income$296.0M8.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed February 2, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $3.66B$1.80B | +103.2% |
| Cost of Revenue | $3.10B$1.47B | +111.5% |
| Gross Profit | $564.32M$337.42M | +67.2% |
| R&D Expenses | $108.82M$70.70M | +53.9% |
| Operating Expenses | $192.86M$122.24M | +57.8% |
| Operating Income | $371.46M$215.18M | +72.6% |
| Interest Expense | $8.13M$1.76M | +363.0% |
| Net Income | $295.97M$176.17M | +68.0% |
| EPS (Basic) | $0.55$3.31 | −83.4% |
| EPS (Diluted) | $0.51$3.14 | −83.8% |
| Shares Outstanding (Basic) | 541.35M53.16M | +918.3% |
| Shares Outstanding (Diluted) | 580.78M56.14M | +934.4% |
05—Questions
Frequently Asked Questions
What drove the growth in net sales this quarter?
The filing attributes the increase to strong customer demand for GPU, high performance computing (HPC), and rack-scale solutions, which are more complex and higher value, resulting in higher average selling prices, especially from large enterprise and data center customers. United States sales rose to $2.61 billion from $1.09 billion.
Why did gross margin decline?
The filing states the decline in gross margin percentage was primarily due to product and customer mix, partially offset by lower cost of goods sold from manufacturing efficiency and other factors.
Why was operating cash flow negative?
Net cash used in operating activities was $324.6 million for the six months, primarily due to a $945.1 million increase in net working capital to manufacture products to meet customer demand. This included a $1,145.2 million increase in inventory and a $422.7 million increase in accounts receivable, offset by a $570.5 million increase in accounts payable.
What is the company doing with the proceeds from its recent equity offering and other large commitments?
The company received about $582.8 million in net proceeds from the December 2023 offering and intends to use them for operations, including working capital, manufacturing capacity expansion, and increased R&D. It also agreed to buy real estate in San Jose for $80.0 million, expected to close in the third quarter of fiscal 2024, and entered a San Jose lease of about 260,000 square feet for 79 months.
What is the company's outlook for operating expenses and capital spending?
The filing states that research and development, sales and marketing, and general and administrative expenses are expected to continue increasing as the company expands its workforce and invests in key talent. It anticipates capital expenditures of $170.0 million to $180.0 million for the remainder of fiscal 2024.
06—Continue