01—Abstract
Summary
Summary of the 10-Q filed May 6, 2024. Cited figures are marked; the original filing is the authoritative source.
Super Micro Computer, Inc. filed this Quarterly Report on Form 10-Q for the third quarter of fiscal 2024, ended March 31, 2024.
Net sales for the three months rose to $3.85 billiona from $1.28 billion a year earlier, and net income reached $402.5 million versus $85.8 million. For the nine months, net sales were $9.63 billion against $4.94 billion, and net income was $855.4 million against $446.4 million. Gross margin narrowed to 15.5% from 17.6% for the quarter, which the company attributes mainly to competitive pricing to win new design wins and to product and customer mix.
Management expects net sales and average selling prices to keep increasing, driven by demand for GPU servers, high performance computing and rack-scale solutions. The balance sheet and cash flow changed substantially during the period. Inventories grew to $4.12 billionb from $1.45 billion at June 30, 2023, and net cash used in operating activities was $1.84 billion for the nine months, compared with $672.9 million provided a year earlier.
The company raised funds through $1.73 billionc of convertible senior notes due 2029, $1.70 billion of net proceeds from the notes issued in February 2024, and a $1.73 billion common stock offering in March 2024. Cash and cash equivalents rose to $2.12 billion from $440.5 million, while convertible notes outstanding were carried at $1.70 billion. The filing also discloses concentration and related-party exposure.
Supplier A accounted for 69.8% of total purchases in the quarter, and customer A accounted for 21.2% of quarterly net sales. Related parties Ablecom and Compuware manufacture a significant share of the company's chassis and power supplies. The company reported noncancelable purchase commitments of $2.9 billiond and recorded a supplemental risk factor on its indebtedness and the convertible notes.
02—Key points
Key Highlights
- Net sales for the three months ended March 31, 2024 were $3.85 billion, up from $1.28 billion in the prior-year quarter; nine-month net sales were $9.63 billion versus $4.94 billion.
- Gross margin fell to 15.5% for the quarter from 17.6%, attributed to competitive pricing for new design wins and product and customer mix.
- Net income was $402.5 million for the quarter (diluted EPS $6.56) and $855.4 million for nine months (diluted EPS $14.53).
- Net cash used in operating activities was $1.84 billion for the nine months, driven mainly by an increase in inventories to $4.12 billion from $1.45 billion.
- In February 2024 the company issued $1.725 billion of 0% convertible senior notes due 2029, with net proceeds of about $1.70 billion, and in March 2024 it completed a public offering of 2,000,000 shares at $875.00 per share for net proceeds of $1.73 billion.
- Cash and cash equivalents increased to $2.12 billion at March 31, 2024 from $440.5 million at June 30, 2023.
- Supplier A accounted for 69.8% of quarterly total purchases, and related parties Ablecom and Compuware remain key contract manufacturers.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Super Micro Computer kept $0.10.
- Revenue$3.85B100.0%
- Cost of revenue−$3.25B84.5%
- Gross profit$597.4M15.5%
- Operating costs−$219.1M5.7%
- Operating income$378.3M9.8%
- Interest, other & tax$24.1M0.6%
- Net income$402.5M10.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed May 6, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.85B$1.28B | +200.0% |
| Cost of Revenue | $3.25B$1.06B | +207.7% |
| Gross Profit | $597.37M$226.36M | +163.9% |
| R&D Expenses | $116.23M$77.52M | +49.9% |
| Operating Expenses | $219.05M$127.28M | +72.1% |
| Operating Income | $378.31M$99.08M | +281.8% |
| Interest Expense | $6.25M$1.29M | +384.9% |
| Net Income | $402.46M$85.85M | +368.8% |
| EPS (Basic) | $0.71$1.61 | −55.9% |
| EPS (Diluted) | $0.66$1.53 | −56.9% |
| Shares Outstanding (Basic) | 564.78M53.28M | +960.0% |
| Shares Outstanding (Diluted) | 614.31M56.23M | +992.4% |
05—Questions
Frequently Asked Questions
How did revenue and profitability change in the third quarter of fiscal 2024?
Net sales were $3.85 billion for the three months ended March 31, 2024, compared with $1.28 billion a year earlier, and net income was $402.5 million versus $85.8 million. Gross profit was $597.4 million, and income from operations was $378.3 million. Gross margin declined to 15.5% from 17.6%.
What drove the increase in net sales?
The filing attributes the increase to customer demand for GPU servers, high performance computing and rack-scale solutions, which are more complex, carry higher value and have higher average selling prices. Management expects net sales and average selling prices to keep increasing, particularly in the United States and Asia.
Why did operating cash flow turn negative, and how was the company funded?
Net cash used in operating activities was $1.84 billion for the nine months ended March 31, 2024, mainly because inventories increased by about $2.68 billion as the company built product to meet customer demand. The company funded this through the convertible notes, the March 2024 stock offering, and borrowings. Its financing activities provided $3.65 billion in the nine months.
What new debt and equity did the company take on, and what are the risks?
The company issued $1.725 billion of 0% convertible senior notes due March 1, 2029, and used about $142.1 million for capped call transactions. It also issued 2,000,000 common shares for $1.73 billion net. The filing's supplemental risk factors note that the company's indebtedness could limit its cash flow and flexibility, that it may need to pay cash on conversion or on a fundamental change, and that conversions may dilute existing stockholders.
How concentrated are the company's suppliers and customers?
Supplier A accounted for 69.8% of total purchases in the three months ended March 31, 2024, up from 26.9% a year earlier, due to purchases of key components. Customer A accounted for 21.2% and customer B for 16.8% of net sales in the quarter. Related parties Ablecom and Compuware also supply significant portions of chassis and power supplies.
06—Continue