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Super Micro Computer (SMCI), a retailer of high-performance servers and liquid-cooled AI racks, has chosen to release its latest quarterly earnings at a time when investors have been forced to view every financial update from the company with a hefty dose of skepticism that stems not only from Hindenburg Research's hard-hitting report back in August but also from the series of events in its aftermath, including SMCI's withholding of its annual report, the launch of a preliminary DOJ investigation into the company's purported accounting malpractices, the exodus of its second auditor in around 18 months, and an imminent de-listing from the Nasdaq exchange.
To make matters worse, Super Micro Computer failed to reassure investors via the contents of its preliminary earnings release and the ensuing earnings call.
$SMCI | Super Micro Computer Q1'25 Preliminary Earnings Highlights:
🔹 Net Sales: $5.9B-$6.0B (Prior: $6.0B-$7.0B) 🔴
🔹 Non-GAAP EPS: $0.75 to $0.76 (Prior: $0.67 to $0.83) 😕
🔹 GAAP Gross Margin: ~13.3%Q2'25 Guidance:
🔹 Net Sales: $5.5B to $6.1B (Est. $6.79B) 🔴
🔹 GAAP…— Wall St Engine (@wallstengine) November 5, 2024
To wit, Super Micro Computer has now reported that it likely earned a quarterly revenue of between $5.9 billion and $6 billion in its fiscal Q1'25, as per the preliminary tabulation. Moreover, its GAAP gross margin for the quarter will likely be computed at 13.3 percent.
For its fiscal Q2'25, Super Micro Computer expects to earn a revenue of between $5.5 billion and $6.1 billion vs. consensus estimates of around $6.79 billion.
For the benefit of those who might not be aware, Super Micro Computer's travails began in August when Hindenburg Research highlighted instances of alleged accounting fraud and corporate governance malfeasance in a detailed report. SMCI then delayed the filing of its annual report for the fiscal year that ended on the 30th of June, presumably in a bid to undertake an internal review.
On the 17th of September, the Nasdaq exchange informed Super Micro Computer that it had 60 days (or until the 16th of November) to either file the requisite annual report or come up with a plan to regain compliance with Nasdaq's rules. Failure to do so can result in a delisting.
Super Micro $SMCI just said this about Nasdaq compliance:
"The Company intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible" pic.twitter.com/RrIRtwGQ8o
— Evan (@StockMKTNewz) November 5, 2024
Today, while asserting that it "intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible," Super Micro Computer refused to provide a definitive timeline for the release of its much-delayed annual report, which has predictably hammered the stock.
Of course, SMCI has already renegotiated a key loan agreement with Cathay Bank, whereby the firm will now furnish its audited financial statements by the 31st of December as opposed to the earlier covenant, which had posited the 28th of October as the deadline for furnishing those financial documents. This indicates that the firm is likely to surpass Nasdaq's 16th November deadline for filing its annual report.
Meanwhile, the DOJ has also purportedly launched an investigation into Super Micro Computer's alleged accounting violations. As per Hindenburg Research's anecdotes, SMCI engaged in distribution channel stuffing by pushing products to distributors based on artificially inflated demand forecasts, undertook partial shipments to meet specific sales targets and inflated its total shipment count in the process, re-hired top executives responsible for "widespread accounting violations" that had resulted in a $17.5 million settlement with the SEC, and paid nearly a billion dollars over the past three years to non-arm's-length suppliers such as Ablecom and Compuware.
Super Micro Computer's investor call didn't go over well and stock is down significantly after hours
Company executives wouldn't discuss EY resigning as $SMCI's auditor after questioning the company's integrity and ethical values,
couldn't say when it would file its audited… pic.twitter.com/rGeAnz022x— kristen shaughnessy (@kshaughnessy2) November 5, 2024
Coming back, Super Micro Computer executives refused to discuss in today's earnings call the circumstances that had compelled the firm's designated auditor, Ernst & Young (EY), to tender its resignation.
When asked by an analyst as to when Blackwell revenues would start showing up in SMCI's books, Super Micro Computer CEO Charles Liang noted that "we are asking NVIDIA every day."
He then asserted:
"Our capacity is ready, but not enough new chips."
At the time of writing, Super Micro Computer shares are down 16 percent in after-hours trading.
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