Super Micro Computer, Inc. Q3 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Q3 FY2020 revenue was 772 million dollars, up 4 percent year-over-year but down 11 percent sequentially from Q2 FY2020.
  • Non-GAAP diluted EPS was 84 cents, up from 57 cents in Q2 FY2020 and up from 49 cents in Q3 FY2019 (a 71 percent year-over-year increase).
  • Gross margin on a non-GAAP basis was 17.7 percent, up 250 basis points year-over-year driven by favorable mix and lower component costs.
  • The company recorded a 10.1 million dollar settlement fee for joint product development, boosting EPS by 14 cents.
  • Free cash flow was an outflow of 32 million dollars driven largely by inventory builds related to COVID-19 risk mitigation.

Key Business Drivers and Performance

  • 5G, Edge and IoT products grew more than 30 percent year-over-year, a major bright spot.
  • Enterprise and channel business remained strong, supported by the company’s building-block-solutions model.
  • AI and machine learning systems saw continued demand, with a broadened portfolio of NVIDIA NGC-Ready systems.
  • Large data center and public cloud are becoming larger strategic priorities; the company now has 30 percent extra manufacturing capacity and increased operations in Taipei.
  • Software and global services continue to grow steadily, supporting margin expansion over time.

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Operator: Mr. Kisner, you may go ahead. James Kisner: Okay. I thought that you were going to read the intro. Are we in the call? Operator: Yes, sir. Go ahead. Did you not hear the intro? James Kisner: No, we did not. Good afternoon and thank you for attending to Supermicro's call to discuss financial results for the third quarter of fiscal 2020, which ended March 31, 2020. By now, you should have received a copy of the news release from the company 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 and Presentations tab. We have also published management's scripted commentary on our website. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation and future business outlook, including the potential impact of COVID-19 on the company's business and results of operations. There are a number of risk factors that could cause Supermicro's future results to differ materially from our expectations. You can learn more about these risks in our press release we issued earlier this afternoon, our most recent 10-K filing for 2019 and our other SEC filin

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