Super Micro Computer, Inc. ( SMCI)

FQ1 2012 Earnings Call

October 25, 2011 05:00 pm ET

Executives

Charles Liang – Chairman and Chief Executive Officer

Howard Hideshima – Chief Financial Officer

Peter Hayes – Senior Vice President Investor Relations

Analysts

Mark Kelleher – Dougherty & Company

Aaron Rakers – Stifel Nicolaus

Rajesh Ghai – ThinkEquity

Glenn Hanus – Needham & Co.

Amelia Harris – Sterne Agee

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Inc. FQ1 2012 conference call. The company’s news release issued earlier today is available from its website at www.supermicro.com. In addition, during today’s call the company will refer to a slide presentation that it has made available to participants which can be accessed in a downloadable PDF format on its website at www.supermicro.com in the Investor Relations section under the Events & Presentations tab. (Operator instructions.)

As a reminder this call is being recorded Tuesday, October 25 th, 2011. A replay of the call will be accessible until midnight November 8 th by dialing 1-877-870-5176 and entering conference ID #4551906. International callers should dial 1-858-384-5517. With us today are Charles Liang, Chairman and Chief Executive Officer; Howard Hideshima, Chief Financial Officer; and Perry Hayes, Senior Vice President Investor Relations.

And now I would like to turn the conference over to Mr. Hayes. Mr. Hayes, please go ahead, Sir.

Peter Hayes

Good afternoon and thank you for attending Super Micro’s conference call on financial results for the FQ1 2012, which ended September 30 th, 2011. Before we begin I’d like to advise you of upcoming investor conferences in which Super Micro will be participating. On November 9 th we will attend the Wells Fargo Technology Conference in New York and on November 17 th we will attend the Southwest Ideas Conference in Dallas where we will present and participate in one-on-one meetings.

By now you should have received a copy of today’s news release that was distributed at the close of regular trading and is available on the company’s website. As a reminder, during today’s call the company will refer to a presentation that is available to participants in the Investor Relations section of the company’s website under the Events & Presentations tab. Please turn to Slide 2.

Before we start I’ll remind you that our remarks include forward-looking statements. There are a number of risk factors that could cause Super Micro’s future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10(k) for fiscal 2011 and our other SEC filings. All of those documents are available from the Investor Relations page of Super Micro’s website at www.supermicro.com. We assume no obligation to update any forward-looking statements.

Most of today’s presentation will refer to non-GAAP financial results and outlooks. For an explanation of our non-GAAP financial measures, please refer to Slide 3 of this presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today’s press release and in the supplemental information attached to today’s presentation.

I’ll now turn the call over to Charles Liang, Chairman and Chief Executive Officer.

Charles Liang

Thank you, Perry, and good afternoon everyone. Please turn to Slide 4. First let me provide you with the highlights of our FQ1. FQ1 revenue was $247.9 million or 4.8% lower than last quarter, and 19.6% higher year-over-year. After-tax net income was $10.5 million or 19.3% lower quarter-over-quarter and 13.2% higher compared to last year. Super Micro’s diluted earnings per share was $0.24 per diluted share compared to $0.29 last quarter or $0.22 last year.

Slide 5, please. With this FQ1 results we have demonstrated a strong start to our earnings fiscal year in the seasonally soft quarter. We anticipated this softness in our August guidance and this quarter unfolded as expected by achieving approximately 20% revenue growth year-over-year. In the past two quarters we have sold more than $0.5 billion of server and storage products, indicating good growth momentum, although in these past quarter there were lots of macroeconomic concerns in the United States and in Europe in addition to somewhat seasonal softness. This impact was relatively minor to our business.

From a geographic productive perspective, the United States accounted for 62.1% of revenue and Asia was 15.8%. While both regions were lower quarter-over-quarter the European share rose to 18.8% last quarter as a strong September was offset by a generally slower summer period. Last quarter OEM and Direct customers accounted for over 44% of revenue and both groups continued to grow steadily. Internet Data Center reached 16.4% of total revenue in FQ1 as certain new products were deployed as the result of the higher OEM and Direct business. System sales also continues to be strong and accounted for over 39% of sales.

I will start with details regarding the progress of our new Generation X9 Sandy Bridge dual processor and H8 Interlagos solutions. As most of our customers are eagerly anticipating them, we have been investing heavily on the final push of the development cycle with our consistently growing engineering team. We will again be first to market with our phase of the product among competition.

We overcame the technical challenge and had carefully tuned and test-engineered a subsystem and a completed solution to ensure them of optimized performance and features before full bore putting us in. Last quarter we began entering into our presale activities through simple and qualifying servers for Sandy Bridge and Interlagos with our customers on specific projects. We are anticipating the launch of Interlagos with great momentum next month. For Sandy Bridge we will continue to increase our tempering and seeding programs and work with large datacenter customers for an early ship program during this quarter, and we expect they will generate additional revenue. However, we anticipate a significant revenue growth from those new solutions to begin in early 2012.

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