Author Topic: SMCI - Super Micro  (Read 11837 times)

Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #60 on: February 20, 2019, 01:27:13 PM »
I got so enthusiastic after reading the previous forum post that I decided to buy back my full position on the opening. Worked out great so far. Impressive uptick today. Loved stocks surprise on the downside, hated stocks surprise on the upside.

Nicely Done!


Liberty

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Re: SMCI - Super Micro
« Reply #61 on: February 21, 2019, 03:48:35 PM »
Did Bloomberg retract their uncorroborated piece yet?
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Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #62 on: February 21, 2019, 04:40:53 PM »
Did Bloomberg retract their uncorroborated piece yet?

No, I don't believe they have.

Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #63 on: August 05, 2019, 12:52:28 PM »
Alright fellas, I just jumped back onto this garbage barge full of cut rate motherboards. @ $16.40 I estimate the stock is currently around NCAV + they own real estate that has significant value. 


Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #64 on: August 15, 2019, 02:51:26 PM »
Earnings look good. Revenue at the top of the guidance range. They continue to generate cash as working capital shrinks.

One nice detail on the call: Financials for FY 2018 (ended 6/30/18) have been submitted to auditor. This shows that they continue to make progress getting their financial statements up-to-date.

https://www.businesswire.com/news/home/20190815005647/en/Supermicro%C2%AE-Announces-Fourth-Quarter-Fiscal-2019-Preliminary

scorpioncapital

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Re: SMCI - Super Micro
« Reply #65 on: August 15, 2019, 11:45:07 PM »
Do China Tarriffs in some ways effect them? I know Intel and some of the others were impacted somewhat.

writser

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Re: SMCI - Super Micro
« Reply #66 on: August 16, 2019, 03:55:53 AM »
Earnings look good. Revenue at the top of the guidance range. They continue to generate cash as working capital shrinks.

One nice detail on the call: Financials for FY 2018 (ended 6/30/18) have been submitted to auditor. This shows that they continue to make progress getting their financial statements up-to-date.

https://www.businesswire.com/news/home/20190815005647/en/Supermicro%C2%AE-Announces-Fourth-Quarter-Fiscal-2019-Preliminary

Almost a year after the hacking 'scandal' I think it's safe to say that that story was overblown and that the market overreacted. I sold my position when shares traded over $20 this year but I'm tempted to get back in. Some random thoughts:

- If you compare the 2017 press release to the new 2017 annual report, book value decreased by 27 million, inventory increased by 100m, and short-term debt increased by 93m (wtf?), gross profit down 8m, etc. Not some obscure minor issues: just a total mess. That doesn't inspire much faith. Also note that the CFO on the most recent conference call didn't want to confirm that the final audited 2018 statements would be 'in line' with the 2018 quarterly press releases. Ugh.

- Even given their accounting issues disclosure the past few quarters has been abysmal. Even ASTA Funding disclosed more information when they were past due with their filings and that is not something to be proud of. We know nothing about the balance sheet apart from net cash, we don't even know the current share count.

- Since June 2017 they've gone (reportedly) from from a -50m net cash position to a +164m cash position, generated ~$2.20 / share in GAAP earnings and grew revenue at a nice clip. Even if you allow for some accounting restatements it looks ok. Doesn't look like the large increase in revenue generated lots of extra earnings though.

- I'm not sure how sustainable the reported cash flow is. I think SMCI had very inefficient working capital management and they are working on fixing this (which is a good thing) but the resulting cashflow is not normalized cashflow. The CFO in the latest conference call: "I think if you look at the cash that we have now, certainly, we have harvested some of that from the balance sheet. And we know that they're going to need that soon we continue to grow again". Doesn't look like a return of capital is on the table.

- Insider transactions paint a bleak picture. I don't see a single buy the past 10 years and insiders have been selling a lot .. Sharecount is steadily increasing.

Tangible book is now probably around $17 (is that relevant?), $3+ / share in cash, and TTM earnings of ~$1.60 / share.  Probably too cheap but I don't think I want to own this with the thesis being it should trade at a premium multiple. Tempted but probably not buying.
« Last Edit: August 16, 2019, 03:58:51 AM by writser »
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Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #67 on: August 16, 2019, 06:48:24 AM »
Do China Tarriffs in some ways effect them? I know Intel and some of the others were impacted somewhat.

Yes, they have been and continue to be negatively impacted. They work closely with Intel, so I would imagine there's a similar dynamic.

Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #68 on: August 16, 2019, 08:02:50 AM »
Earnings look good. Revenue at the top of the guidance range. They continue to generate cash as working capital shrinks.

One nice detail on the call: Financials for FY 2018 (ended 6/30/18) have been submitted to auditor. This shows that they continue to make progress getting their financial statements up-to-date.

https://www.businesswire.com/news/home/20190815005647/en/Supermicro%C2%AE-Announces-Fourth-Quarter-Fiscal-2019-Preliminary

Almost a year after the hacking 'scandal' I think it's safe to say that that story was overblown and that the market overreacted. I sold my position when shares traded over $20 this year but I'm tempted to get back in. Some random thoughts:

- If you compare the 2017 press release to the new 2017 annual report, book value decreased by 27 million, inventory increased by 100m, and short-term debt increased by 93m (wtf?), gross profit down 8m, etc. Not some obscure minor issues: just a total mess. That doesn't inspire much faith. Also note that the CFO on the most recent conference call didn't want to confirm that the final audited 2018 statements would be 'in line' with the 2018 quarterly press releases. Ugh.

- Even given their accounting issues disclosure the past few quarters has been abysmal. Even ASTA Funding disclosed more information when they were past due with their filings and that is not something to be proud of. We know nothing about the balance sheet apart from net cash, we don't even know the current share count.

- Since June 2017 they've gone (reportedly) from from a -50m net cash position to a +164m cash position, generated ~$2.20 / share in GAAP earnings and grew revenue at a nice clip. Even if you allow for some accounting restatements it looks ok. Doesn't look like the large increase in revenue generated lots of extra earnings though.

- I'm not sure how sustainable the reported cash flow is. I think SMCI had very inefficient working capital management and they are working on fixing this (which is a good thing) but the resulting cashflow is not normalized cashflow. The CFO in the latest conference call: "I think if you look at the cash that we have now, certainly, we have harvested some of that from the balance sheet. And we know that they're going to need that soon we continue to grow again". Doesn't look like a return of capital is on the table.

- Insider transactions paint a bleak picture. I don't see a single buy the past 10 years and insiders have been selling a lot .. Sharecount is steadily increasing.

Tangible book is now probably around $17 (is that relevant?), $3+ / share in cash, and TTM earnings of ~$1.60 / share.  Probably too cheap but I don't think I want to own this with the thesis being it should trade at a premium multiple. Tempted but probably not buying.

- No dispute that the financials were a mess. The two principal financial people at the company were the CEO's wife (that sounds familiar) and a CFO who had been there since the beginning of the company. In my opinion neither of them were qualified. Additionally, the CEO is an engineer who appears to focus 100% on product development. The good news is that the old CFO left in early 2018 and the CEO's wife is no longer Chief Administrative Officer and Treasurer. Now she is just a "Vice President." They also just added the former CFO of Brocade to the board.

- My understanding based on the comments they've made is that the vast majority of the financial restatements relate to the timing of revenue recognition. Basically the sales guys were allowed to book sales super aggressively...in ways that a competent accounting department would never allow. So, for example, sales that should have been booked in Q2 were booked in Q1. The company is now having to go sale-by-sale to try and correct the revenue recognition post hoc. That's a big, big job. Think about how that would affect the inventory levels, etc for any given period.

- I have no idea how they screwed the 2017 short term debt # up, but the total amount of debt looks to be the same on both statements

- Yeah, disclosure hasn't been good since the accounting problems were revealed. I have in my notes that @ 3/31/19 there were 49,881,914 [basic] shares. I think they said this on the Q3 call

- No, they have $236 million in net cash @ 6/30/19

- The recent FCF is not sustainable. Like most manufacturers they need more working capital when they are growing, and less when they are shrinking. Revenue has been down Y/Y the last two Qs, so cash has gone up as inventory is sold.

- CFO basically refuses to make any statements about future buybacks, dividends, etc. The company has bought back shares in the past.

- CEO looks to own ~16% of the company.

- Premium multiple isn't something that's even on my mind here.


Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #69 on: August 16, 2019, 08:10:21 AM »
Look, all I'm really saying here is that I'm going to keep posting in this thread until Liberty puts 110% of his portfolio in this name.