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Recent months have brought significant turmoil for Super Micro Computer cSMCIc, a company renowned for its production of high-density AI servers. The stock experienced a sharp decline in August following an announcement that the company would delay its 10-K filing. This delay came on the heels of allegations made by short-seller Hindenburg Research regarding potential accounting malfeasance and inconsistencies. Furthermore, the company revealed its inability to file its annual report in a timely manner.
Subsequent events compounded the crisis at Supermicro, with reports emerging in September of an investigation by the Justice Department. In October, the situation worsened as the company's auditor, Ernst & Young, resigned. These events were indicative of the challenges facing the company, leading to a plunge in the stock price. In November, Supermicro received a delisting notice from the Nasdaq stock exchange, which it was able to extend, reassuring investors that the company did not anticipate restating any financial results upon filing the 10-K.
Finally, on February 11th, investors received clarification regarding the timing of the filing. During its fiscal second-quarter earnings report, management announced that they would submit the report by February 25th. This news, coupled with a growing investor confidence in the stock post earnings report scheduling, contributed to a 25% increase in the stock price between February 5th and February 12th, potentially indicating a positive turn following the financial reporting issues.
Supermicro's second-quarter earnings report marked the company's third consecutive round of unaudited preliminary financial figures, dating back to last May. Management confirmed that while they would not be restating previously issued financial statements filed with the SEC, adjustments had been made to the fiscal 2024 fourth-quarter earnings report. These adjustments resulted in reductions to earnings per share, signaling a correction that, given the circumstances, seemed relatively modest but will only be fully understood upon the filing of the report.
The preliminary second-quarter earnings report exhibited robust growth for Super Micro Computer, despite falling short of estimates. Revenues were reported at $5.6 billion to $5.7 billion, reflecting a 54% growth rate at the midpoint. However, concerns lingered over gross margins, which decreased to 11.8% to 11.9%, down from 15.4% in the same quarter a year earlier. Adjusted earnings per share also rose by 5% year over year but fell short of expectations.
Looking ahead, the company revised its full-year revenue guidance downward, from $26 billion – $30 billion to $23.5 billion – $25 billion. While these figures typically lead to a stock price decline, investors viewed the potential filing of the fiscal 2024 report positively. Management also indicated plans to file the 10-Q for the first and second quarters by February 25th.
Super Micro Computer disclosed that it had received subpoenas from both the DOJ and SEC following the short-seller report, with the company cooperating with document requests. While the situation appears to have stabilized, investors are advised to await the filing on February 25th for further updates before making investment decisions.
It remains crucial for investors to monitor the scheduled filings, as any potential delay could impact the stock adversely. Should the filings proceed as planned and without major adjustments, investors can shift their focus back to evaluating the company based on its performance rather than accounting concerns. However, with challenges potentially looming due to slower growth and declining margins, Super Micro Computer may face a different set of hurdles in the near future.
In conclusion, investors are urged to mark February 25th on their calendars as a pivotal date that may shed light on Super Micro Computer's future trajectory. The filings and subsequent developments are essential factors to consider when assessing the company's outlook in the coming months.