Shares of Super Micro Computer (trading as ‘Supermicro’) plunged 17% after the company announced delays in filing its annual results and issued weak guidance. The decline followed the release of unaudited quarterly results that fell short of revenue expectations.
The server maker’s shares have been under pressure since Ernst & Young (EY), its auditor, resigned recently. This resignation led to a 32% decline in the company’s share price last week. During a call with analysts on Tuesday, Supermicro declined to address questions regarding EY’s resignation or the corporate governance issues raised by the departure.
CEO Charles Liang stated that Supermicro is engaging a new auditor and working hard to catch up with its financial reporting obligations. “We are working with urgency to become current again with our financial reporting,” said Liang.
Supermicro has been facing allegations of accounting irregularities and accusations from an activist group that it shipped sensitive components to sanctioned entities, potentially violating export control regulations.
The San Jose-based company remains at risk of being delisted from the Nasdaq stock exchange if it fails to submit its annual report to the US Securities and Exchange Commission (SEC) by mid-November. Supermicro has not filed audited results since May, adding to investor uncertainty.
The company has also formed a special committee to probe into concerns raised with its audit committee. According to the former, an investigation into concerns raised by EY has now concluded. Following a three-month review by independent counsel, no evidence of fraud or misconduct by management or the board was found, confirming that the audit committee acted independently.
“The Committee is recommending a series of remedial measures for the Company to strengthen its internal governance and oversight functions, and the Committee expects to deliver the full report on the completed work this week or next,” said the special committee. “The Special Committee has other work that is ongoing but expects it to be completed soon.”
Supermicro releases preliminary Q1 FY 2025 results and Q2 FY 2025 guidance
For the first quarter of fiscal year 2025, which ended on 30 September 2024 (Q1 FY25), Supermicro expects to report net sales in the range of $5.9bn to $6bn, compared to an earlier guidance range of $6bn to $7bn. Gross margins under both Generally Accepted Accounting Principles (GAAP) and non-GAAP standards were estimated at approximately 13.3%.
The company anticipates reporting GAAP diluted net income per share between $0.68 and $0.7, which was within its previously provided guidance range of $0.6 to $0.77. Non-GAAP diluted net income per share was expected to be $0.75 to $0.76, compared to a prior estimate of $0.67 to $0.83.
Supermicro projects cash and cash equivalents of approximately $2.1bn, with total debt standing at about $2.3bn, which includes $600m in bank debt and $1.7bn in convertible notes.
Looking ahead to Q2 FY25, which ends on 31 December 2024, Supermicro estimates net sales between $5.5bn and $6.1bn. GAAP net income per diluted share is forecasted at between $0.48 and $0.58, with non-GAAP net income per diluted share estimated at $0.56 to $0.65.
The company’s outlook for GAAP net income per share also includes approximately $54m in stock-based compensation and related expenses, offset by $14m in related tax effects, which have been excluded from the non-GAAP estimates.
Supermicro, which specialises in high-performance and high-efficiency server technologies, serves clients across multiple sectors, including data centres, cloud computing, high-performance computing, and enterprise IT. In early October, the company announced that it was shipping over 100,000 graphics processing units (GPUs) to customers each quarter, news that boosted its share price by 14% and added approximately $3bn to its market value.
Read more: Supermicro reports shipping 100,000 GPUs quarterly
