Super Micro Posts Robust Earnings

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SMCI reported F2Q non-GAAP EPS of $0.35 on $356M vs. Street $0.26 on $333M (and our $0.27 on $335M). Guide was $0.25-0.31 on $320-350M. In contrast to F1Q, Geo strength was led by Asia (23% or rev. vs. 18% q/q) with IDC a particularly strong vertical in that region. EMEA (24% vs. 23% q/q) and the US (51% vs. 57% of rev. q/ q) were also solid. China continued as the largest Asian country (~50% of Asia).

Server Systems rev. of $173M (49% of rev.) vs. $143M (46%) q/q, while ASPs increased to $2700 from $2600 q/q and $2100 y/y. Internet datacenter at 13% of rev. vs. 8.3% q/q. OEM/direct 47% of rev. vs. 39% q/q. Storage up 24% q/q and 49% y/y. Xeon Phi up 35% q/q and 58% y/y. Ivy Bridge launched on schedule late in F1Q and ramped nicely in F2Q as expected.

GM 15.5% vs. our 15.2% est. and 15.2% q/q on much stronger Taiwan utilization (41%), increased server systems business mix (vs. components), product mix, increased service/software and purchasing power benefits of increased scale. SMCI maintained its 3-6 mos. target model of 16-18% GM and 6-8% OpM. GM% should gradually improve q/q on continued benefits from the factors that drove improvements in F2Q. SMCI has noted that software/service is becoming a steady profit stream (small rev. but very high margin).

F3Q guide of $0.24-0.30 on $320-350M vs. prior Street $0.25 on $317M (our $0.24 on $318M).Raising estimates and instituting C15 EPS of $1.55 on $1.59B. We maintain our Buy rating with a $23 target (raised from $16) on 14x C15 EPS of $1.55 + net cash ~$1.10. We note that the 5-year ave Price/NTM earnings has been 12x (range of 7-17x) according to FactSet.

 

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