Q4 2021 Super Micro Computer Inc Earnings Call
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[music].
Okay.
Good day, and thank you for standing by welcome to the Super Micro fourth quarter and full year fiscal Pennington 1 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to pass bar 1 on your telephone.
They require any further assistance please press star zero.
Thank you I would now like to hand, the conference over to Nicole Ms. Joan.
Investor Relations. Please go ahead.
Good afternoon, and thank you for attending Super Micro's call risk on financial results for the fourth quarter and full year fiscal 2021 and June 30 of 2021.
By now you should have received a copy of the news release from a company that was distributed at the close of the regular trading and is available on the company's website.
As a reminder, during today's call the company referred to on prices and spreads available to protect them.
The company's website.
That presentation tab on the couple of management's scripted commentary on our website.
Please note that some of information here during our discussion today will consist of forward looking statements, including without limitation those regarding revenue gross margin operating expenses other income net expenses taxes capital allocation and future business outlook, including the potential on that the COVID-19, and the company's business.
Results of operations.
There are a number of risk factors that can cause super micro's future results to differ materially from our expectations.
Probably more about these risks in the press release issued earlier. This afternoon on most recent 10-K filing for fiscal 2020.
Other SEC filings all of these documents are available on the IR section of Super Micros website.
No obligation to update any forward looking statements. Most of today's presentation will refer to non-GAAP items results and business outlook for on an explanation of our non-GAAP financial measures. Please refer to the accompanying presentation or to our press release published earlier today. In addition, a reconciliation of GAAP.
Non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation.
At the end of today's prepared remarks, we have a Q&A session for sell side analysts to ask questions and now I will turn the call over to Charles Liang founder Chairman and CEO.
Charles.
Thank you Nicole and good afternoon, everyone on breezed through our lungs beds for the first time, our quarterly revenue.
Exceed $1 billion.
Fiscal Q4 of 2021, we believe both year over year revenue growth of 19 point she per cent for the whole fiscal year 2021, our revenue grew 6 putting 5 per cent. We had a good March 2 and finally resumed the growth starting from.
March quarter this year after the impact from.
The peso 10, Kt day and the cold.
19 challenges.
Net revenue growth was achieved by some wins from our large enterprise customers.
That's my opinion mission, Hi Tech companies needs customers choose Super micro because of our Green computing Park on outage faster time to market and positive free total IC solutions, especially in a price.
Wow.
And Pfizer.
<unk> market.
No not Luca as on some key highlights from the quarter.
Our fiscal first quarter net sales totaled 1 <unk> 7 billion up.
19 punchy per se.
Most year over year and quarter over quarter.
On the top end of our guidance range.
Gross ROI I believe is much higher than day OTA industry.
On a major geographies contributed double digit growth year over year quarterly growth.
Our fiscal fourth quarter non-GAAP earnings per share it was 51 thing.
From Citi is thin.
Peter you added last year not to you.
We saw a significant increase in sales from new and.
An existing large high profile customers.
Our strong momentum is mainly driven by our business expansion on hardware solution to total IP solution.
Net consists of hardware.
We are in service.
We have probably on our software engineering resource in the past 24 months to allow us to swiftly executed this plan.
Through.
Engagement in close collaboration with strategically between hardware and software partners.
We have provided our customers.
We'll optimize our pits.
Certified and ready to deploy reference architectures.
These are large.
Large volume older people eat plan b without customers, having to go through complicated posted of hardware validation software compatibility.
By chance disruption.
So we win for everyone.
Adi.
Fiscal Q4, we successfully executed our lunch of entire ice day, MTBE, non and Nvidia <unk> hundred GPU based on <unk> and began to ship more than 200 application optimized solutions.
Solutions.
They are all based on the strong foundation of our solar PV power solution.
This optimized system.
8 in house leveraging.
Close to 3 decades of subsidy from innovations, including manageable in gross yield policy surprise and.
On coating technologies.
That's more on our security and managed to Minnesota empower customers to deploy manage and scale.
And the <unk> from enterprise to Hyperscale.
On a product side, our new icebreaker faith ex <unk>.
Generation multiple <unk> solutions.
Gangs, great traction among customers, who are looking to scale their enterprise and cloud data centers.
From sugar play Michael operating to between <unk> <unk>.
And the upcoming when free.
All of these resource savings Pathak from nice.
Supported things nvme, and often persistent memory from.
<unk> have a GPU.
PGA computations.
Providing optimized.
Momentum in the face of a tissue to a variety of customer workloads.
Our CPU product lines, continuing their strong growth with ex.
Promotion of AI machine learning application demands.
These 2 new ice data.
I mean non base.
GPU pulse on 9 supporter larger.
Larger on GPU memory, and accelerated compute intensive applications.
Our per year to now GPU system.
Moving to be a tough sector since its introduction.
To reach the optimum mix of CPU GPU ratio and resource saving features.
Later this year, we will be introducing a brand new universal GPU per thousand 9 <unk>.
We'll provide even more flexible calculation for minute, Stephen CPU and GPU module combination for.
Push it on limited, we see some things too.
And performance up to 50% when compared to competition.
Our lungs in June during Computex 2021.
Our plug and play.
Wholesale lines is.
Integral part of our complete solution strategy growth for World. These turnkey drax.
Underground.
<unk> solutions enable design and vegetation policies.
And on a fuel security for our AI <unk> enterprise cloud is starting to customers.
Upon achieving these total IP solutions customer only need to connect power and networking then theyre immediately ready to go on their application.
Shorten the time from making decisions pool.
<unk> results.
To further improve sales and operation efficiency.
We will launch our total consolidator tool to enable Peter <unk>, CEO dimension, which are wealthy further aid ready to service our customers in the coming few weeks.
This tool mix.
To achieve.
Optimization.
If you submitted to debit has become liquidation.
Among our sales engineer Pn and customers.
We've recently completed our Taiwan campus expansion.
Now with our total 3 million square feet templates in Taiwan.
We are equipped to deliver not only sufficient capacity.
Hi chain designers.
Also lower coastal structure.
Combined with the manufacturing facility.
Combating and Netherlands, Super micro is well positioned to grow market share.
Economic scale agility quality and rapid delivery time.
To satisfy our customers a faster growing demand, we are working aggressively across our global supply chain too.
Improve our particular parts shortage.
In summary.
Super Micro had been Saudi they're in transforming into a total IV solution company from.
Silver hardware company.
In addition to providing the green is the hard way, our total solution our software and service.
Pull back on.
Now do it for large enterprise cloud AI and telco customers.
Second our Pearl on campus expansion Fabulous, our solution capacity and knows our coastal Charles here.
Now if we decide to do so we can start with beauty is our expense and see the commentary headquarter.
<unk>.
Third our business automation program, including the <unk>.
And Peter <unk>.
Peter C systems, whereas significantly improved customer experience by streamlining our customer on the translation and older policies, resulting in short term solution delivery time with better quality and optimization.
With the above his summary, I believe.
Our fiscal 2022 revenue will reach at least.
<unk> balance.
And start to grow much faster than the net.
And then I'll pass.
4 years.
In closing.
I am pleased that leads to the progress of our business transformation.
Each has style.
Started to speed up.
Our business execution in fiscal 2021 has.
Is it a total solution company, we are now able to growth business much more efficiently and achieve our $10 billion per day may now go quicker per head.
Yes.
We are able to put on in the 42026.
2025, or even sooner.
With that I will now.
Now tests on a quota February again, our chief financial Officer.
Additional details on the equivalent.
Thank you Charles.
We continue to accelerate in all major areas of the company and exceeded $1 billion in revenue for the quarter, which was at the high end of our guidance range of.
The growth was driven by wins from large enterprise enterprise customers and key high Tech companies worldwide continued strength across all major geographies and solid demand for our products and services.
Our fiscal fourth quarter revenue totaled 1.07 billion, reflecting a 19% increase both on a year on year and quarter on quarter basis.
Looking at Super Micro's Q4 revenue.
Our verticals, we achieved $672 million any organic enterprise and channel.
And machine learning vertical.
$366 million.
And large data center vertical and third party volume.
And the <unk> telco.
Edge Iot vertical.
Systems comprised 78% of total revenue and the volume of systems shipped was up year over year, while the nodes shipped were down year.
System, Asps increased year over year and quarter on quarter.
Performance was strong across all major geographies this quarter on.
On a year on year basis Asia increased 25%.
The U S increased 21%.
Europe increased 13%, who on the rest of the world decreased 3%.
On a sequential basis U S sales increased 30% Europe increased 14% Asia decreased 1% and the rest of the world increased 7%.
From this point forward unless otherwise noted I will be discussing financial metrics on a non-GAAP basis.
Working down the P&L Q4, gross margin was 13, 7% down basis year on year, and 10 basis points quarter on quarter.
We expected our Q4 gross margin to improve 70 basis points primarily.
Free.
<unk> costs incurred.
In Q3.
Perfect.
Sure.
Costs did not repeat Inc.
However, expedite fees and higher shipping costs.
By 50 basis points quarter over quarter.
As reported by many other companies around the world supply chain pressures related to the resurgence of variance of COVID-19 persist.
Turning to operating expenses Q4, Opex on a GAAP basis was essentially flat quarter on quarter and decreased 7% year on year to $106 million.
Decrease year on year was caused by a decrease in incentive bonuses offset by higher head count This year, which was primarily in R&D on.
On a non-GAAP basis operating expenses increased 4% quarter on quarter and increased 9% year on year to $99 million.
The quarter on quarter and year on year breaches were related to head count and other personnel costs as we continue to invest in human capital to address our growth opportunities.
Other income and expenses include.
Interest expense, which was $2.1 million loss as compared to a $1.4 million gain last quarter. The sequential change is mostly related to FX.
This quarter, our tax benefit was $1.6 million on a GAAP basis, and an expense of $1.8 million on a non-GAAP basis our.
Our non-GAAP tax rate was 4% for the quarter.
Lastly, our share of income from our JV was $6 million this quarter as compared to our cost.
$3 million.
Q4, non-GAAP diluted earnings per share for 81.
As compared to 50 expense in Q3 of fiscal 'twenty, 1 and 68 in the same quarter of last year.
Cash flow from operations totaled $64 million.
Compared to cash flow used in operations of $124 million in Q3.
Capex totaled $13 million.
<unk> growth.
$50 million.
Key uses of cash during the quarter included increases to inventory and receivables while key providers of cash included an increase of $144 million and accounts payable.
And $12 million in deferred revenues.
The increase in deferred revenue was due to higher sales of our service service contracts. We also used $12 million purchase shares this quarter.
Our closing balance sheet cash position was 232 million, while bank debt was $98 million, resulting in a net cash balance of $134 million.
Turning to the balance sheet and working capital metrics compared to last quarter. Our Q4 cash conversion conversion cycle was 80 days, which was down from 86 in Q3, beating our target range of 85 to 90 days.
The absolute level of our inventory.
Days of inventory at 96 days decreased.
Days sales outstanding was 37 days, while days payable outstanding totaled 53 days.
Now turning to the outlook for our business.
We expect net sales in a range of 900 million from $980 million.
GAAP, which is GAAP diluted net income which results in GAAP diluted net income per share of between 16 and 36.
And non-GAAP and non-GAAP diluted net income per share of <unk> 28 to <unk> 48 for the first quarter of fiscal year 'twenty, 2 which ends September 32021, we.
We expect gross margins to remain at similar levels sequentially in Q1 with upside potential as we continue to manage supply chain costs and maintain price discipline.
Over the coming over the upcoming quarters, we expect to achieve margins within our target model as we further scale up our Taiwan operations and begin to gain traction from our new product offerings and auto are configured or <unk> and <unk> solutions.
GAAP operating expenses are forecast to be approximately $110 million and includes $7 million in stock based compensation expenses and $1 million in other expenses.
Non-GAAP operating expenses.
We expect other income and expense including interest expense.
The total roughly $10 million and expect a nominal contribution from our JV.
Non-GAAP operating expenses are forecasted to be up quarter on quarter from continued investment in R&D.
Lower NRT expected and higher personnel costs.
The companys projections for GAAP and non-GAAP diluted net income per share.
Both assume a tax rate of approximately 16%.
And our fully diluted share count of $53.7 million shares per GAAP and 55 million shares from non-GAAP.
The outlook for Q1 of fiscal year 'twenty GAAP.
GAAP diluted net income per common share includes approximately $8 million in expected stock based compensation and other expenses net of taxes that are excluded from non-GAAP diluted net income per common share.
$1 billion to $4.5 billion.
GAAP diluted net income per share of at least $2.60.
And non-GAAP diluted net income per share from at least $3 for fiscal year.
22, which ends June 32022.
GAAP diluted net income per share.
Both assume a tax rate of approximately 16%.
And our fully diluted share count of $55.3 million shares per GAAP and $56.5 million shares for non-GAAP EPS.
Outlook for fiscal year 'twenty, 2 GAAP diluted net income per share includes approximately $30 million.
Sensation and other expenses.
Net of taxes that are excluded from GAAP diluted net income per common share.
We expect Capex for fiscal <unk>.
On the 22 of approximately.
Brian.
Nicole I will turn it back to you for Q&A.
Operator, you can open the lineup across them.
Thank you at this time I would like to remind everyone. If you would like to ask a question.
Ken Please press Star then the number 1 on your telephone keypad.
On your question basketball hockey.
And your first question comes from the line of maybe home CE with net.
Thank you your line is open.
Yes, thanks for taking the question on the other.
Couple of.
Follow ups.
If I look to take the midpoint of guidance.
There is a little bit less.
On leverage in there.
Operating cash.
In other words on maybe.
200.
On a basis point of improvement to get to $3 of earnings.
But what I wanted to understand is what are the key assumptions for component cost is this a base case.
Conservative case.
And I have a follow up to that.
And as I say, it's based on conservative phase.
Because the supply chain continue on to <unk> and although many of the good news agency.
All of Us have trial.
And EMEA is it global or shutting the program. So it's a conservative basis, but because our operation now.
Able to dramatically.
Although our overall cost.
Right.
<unk>.
Where is the most.
What segment of the supply chain, you're experiencing the most shortage what are the key components that youre relative.
Relatively.
Most difficult time procured.
IC chip.
Essentially yes.
I O.
Thank you.
Okay.
And.
Question on the cash flow.
What was that.
And on what position towards the reported.
June quarter on and what should we assume for fiscal year 'twenty 2.
So I'll have to get back to you <unk> on that.
Okay given.
Given the <unk>.
Capex growth in fiscal year, 'twenty, 1 almost $60 million.
And the build out of our Taiwan facility should we expect.
Capex to moderate from here.
Absolutely.
Yes, because our Taiwan operating any of the <unk>, we add about 2.1 day.
Staff in Taiwan, and lastly on line.
Or are people had been the way our chain and day guests ammonia into that new from the last month.
Other than day in our <unk> automation as we as I mentioned for <unk> and <unk>.
We hire people and 10 people and they are about oil weighted.
And start with <unk>.
Subject to certain customer and we will grow that apply.
Right for our customer in next few weeks.
Okay, great. So I will get back on investment have been day al.
So Charles are you, implying that the capex should decline in fiscal year 'twenty 2.
Maybe.
We are growing I mean, 2022, 23 and before we expect continuing on to go so I guess the.
Operating that explains the 1 shrink not mangrove.
<unk>.
Kind of a consistent beating that.
Limited growth because we already invested there.
Alright, Thank you I'll get back into the queue. Thank you.
Your next question comes from the House Oxy net NOI from your line is open.
Yes. Thank you.
Congratulations on.
Strong results, especially on free cash flow.
We were expecting a drain based on commentary from last quarter and generated very nice free cash flow and it looks like the big Delta relative sorry.
This was an increase in days payable.
Given this environment of constrained component environment.
I mean, how is this pulled off basically.
So on.
Now we did have a lot of inventory that came in at the near the end of the quarter and so that's what's on our cards accounts payable 2 to rise and with a resulting rise in GTO.
Okay.
Now considering the positive to keep.
Kind of a high inventory.
Because we strongly believe our customer need that goes for that.
And so.
Yes go.
Go ahead sorry please.
So you can tell from our forecast from a revenue forecast that.
Our sales are not shipping as they traditionally do in Q1, and so therefore, we needed to have more inventory on hand, which was why.
Alluded to the challenges of cash flow for this projected cash flow for Q4, but we ended up in a good position.
I see.
So I guess.
Because we built up the inventory at the end of the quarter to satisfy the strong demand you're seeing in the September quarter.
And the balance sheet it is showing up as.
Increased days payable, but what youre, saying is that the days payable terms actually it didn't increase it's just simply the timing of which.
Youre seeing the inventory.
That's exactly right.
Got it okay understood okay.
And.
I don't recall the last time, you guys gave full year guidance.
I'm not sure if we ever have before but certainly I don't think you did during fiscal year, 'twenty, 1 or fiscal 'twenty or past few years when youre on 10-K filing delay Hill.
So what has changed to give you visibility to guide on a full year basis, and importantly, almost 10% above the consensus estimate.
Non much reason by putting too much because we have a successful ex pension in Taiwan and also our opinion season into automation, including <unk> <unk> and <unk> and also a company its pending from a hardware solution company who.
Total items solution company. So we saw a good idea.
On a market.
Kinds of more complete the picture for the whole year and 1 on future.
Okay, Alright, and it's net 20% growth guidance for fiscal year 'twenty 2.
Is this tied to any sort of in the seat growth expectation.
I'm sorry, what.
The last part of your question tied to what is it tied to server industry growth.
Any sort of server industry growth expectation or is it independent of several industry growth.
Non client not quiet as we mentioned.
We had a return.
Faster growth beginning to model in.
The vendor before 2017 before our pancake day, our growth always had been 2 times.
4 times faster than the industry and we believe we have been sent per day at phosphate Hill has been smart enough. So start from March.
June last quarter, we start to outperform than the industry and I believe we were thoughtful will outperform non industry growth rate, maybe double or triple or even more.
Looking for growth.
So we are winning back share in yellow.
Yes on that.
Clearly, but is there a particular industry growth rate that you are.
Expecting and were a drag on 20% year reported a 5% 10% 2%.
Okay.
Martin.
Got that.
With our <unk>, 5% to 10% and our growth relays UBS.
<unk> to quadruple over day hopefully.
Okay, Great and then my final question is that.
The.
Minimum $3 per share does that correspond to the low end of the revenue guidance or to the midpoint of revenue guidance.
I would say it's a conservative.
Number.
Okay, great. Thank you a coffee before.
Thank you.
Your next question comes from the line of Ananda Baruah from loop capital. Your line is open.
Hey, good afternoon, guys. Thanks for taking the question and congratulations on the.
Strong revenue execution, and the visibility to put out but on the long term or fiscal year Rev Guide here.
I guess a couple from me if I could David could you just walk back through the components that you spoke to on on gross margin I just wanted to make sure that.
But on the straight on those and then I have a quick follow up as well.
Certainly so when we finished.
Last quarter at.
At $13.8.
We had some about 70 basis points.
Discrete costs and.
Which included some some shipping costs as well, but mainly it was principally the streets from discrete costs that we didn't expect to occur. So this quarter.
<unk> did not did not occur, but we did have 50 basis points more of.
Shipping costs.
And it was it was really caused by R.
Our directed effort to to deliver product to our customers on time.
And because that's what our customers expect and demand. So that's really that's really the reason that we were not able to raise margin of higher.
And just because of that again.
Yes.
Yes got call and and so if you lost the 72 that sticky at 13 point wide and then.
Got it.
Sorry, you lost 70, and engage 77 taking into force.
<unk> thousand 14, and a half or so and then you had 50 more so that ticket.
That would have taken get back down to 14, and then was there I think have doing that math right correct me if I'm wrong and then was there was there an incremental 30 basis point headwind that brought it down from the $13.7.
Well there was we had.
2 things 1 we had.
Had deferred revenue that we added to our balance sheet of about $12 million. So we had to we had to carve out some income for further our services and we also add just the rest was just product mix and under.
Got it got it.
Okay.
Then.
Like how should we what is the.
Sort of the pushes and pulls.
<unk> mentioned it on their own canned remarks.
That.
Do you expect in the coming quarters can move up into the into the 14% to 17% range. What are the what are the pushes and pulls there.
And if there's any way to give them by order of magnitude that would be helpful. Also.
Sure absolutely so.
We realized that with the delta of variance, it's hard to say that.
Covid is over and so and so therefore, we expect to continue to have challenging challenges on the supply chain shipping costs. However.
We do expect our other initiatives such as our transition over to Taiwan.
Our new product offerings, and especially in those verticals.
Ah.
Attractive.
Our more attractive gross margins.
As well as our <unk> and BDC configuration, we expect the benefit of those things to start to to come to the business in the upcoming quarters. So on the short run we know that Taiwan has a has gone online.
However, it's going to take a couple of quarters to start to realize benefits.
Any any casually.
Lee I'm not the only 1 being sort of intrigued about this and you can see he gets it.
Give us some sense of for fiscal 'twenty, 2 what the gross margin could look like.
So we we've.
We've given guidance on the topline on the bottom line, but we're not doing other than the fact that we expect gross margins to improve we are not giving further guidance.
Got it.
On a reasonable to think that you would be.
Yeah, our target our target is to go and I think this.
And the notes they are targeted to be.
Back within our range.
Bye bye during the year.
Okay on a range.
Yes, our range by the way was 14 to 17 yet.
Yes appreciate it I'll get back into queue I appreciate it that's really helpful.
Your next question comes from the line of any cash today.
Rob Frankel your line is open.
Yeah, Hey, guys. Thanks for taking the questions.
Guys with the industry a hole.
Deals on our supply chain shortage.
Semiconductor IC shortages et cetera.
Curious on on your side of the business have you been able to in both euro and customers.
To provide you with extended lead times.
And is that provided you with better visibility.
And then on.
On the heels of that kind of tied to that question.
All of the supply to meet demand.
Nathan.
As you see it.
The current quarter.
Very good question again.
Although entirely LIBOR, plus where we could buy the steel we cannot get it level we want.
So we cannot share for OLED mental our customer.
What I can say we can ship.
Most of that.
Maybe.
<unk> had to weigh that.
Good day.
On a regular time.
And the good thing that we have a lot of the Peter Cosmos.
On a customer so that they understand now global theory cookie.
So a longer lead time is people with on licensing that but basically they are cooperative. So we cannot ship <unk> customer on me, but.
Basically the customer happy we sell.
The facility.
Okay.
What is your current view of expectations of when that normalizes.
Does your fiscal 'twenty 2 guidance reflect a view that the tightness in the semiconductor supply chain starts to normalize through this fiscal year or do you think is out further than that just curious on what your thoughts are.
Yes.
I share before and now.
Traditionally our growth and momentum.
Pablo to people faster than the industry because of that.
Our gross <unk> ratio and that's why we are handled per se.
Net.
$10.
Even non because.
So with <unk> globally, I believe our growth with much better than that.
Yep.
The final quick question.
Thanks going on in.
In the server.
The universe surround the semiconductors and so on.
I'm curious of how what kind of growth that youre seeing in the GPU accelerated server platforms.
Do you think that there is a longer term narrative that we're at the point, where actually the richness of the server configurations can really drive a positive upward trend in blended ASP for foreseeable future I'm just curious on how youre seeing compute architectures evolve that maybe benefits you guys.
From a growth perspective.
Yes.
On average a company based on silicone value with Teck Cominco challenge with Aicha, New technology, that's why north of appealing.
CPU Nelson Stephens TPU Mesothelium per day to from now to the big change to Us and Thats why I just mentioned, we will introduce Glen <unk> a brand new architecture with a market very soon and we also are designed in on <unk> TP.
<unk> put it from and that would be great day by end of this year. So all overdose.
To provide a much more flexible.
What kind of put on multiple different Cpus Mendes multi pillar <unk> GPU mentor and people on the form factor so over a period of from <unk> with.
Web benefits to our customer.
Free cash.
End of <unk>.
Optimize the old I think income you mentioned.
Now on new.
Architecture <unk> basically.
Gwen clean and kind of animals on the TPS solution. So we are very happy.
That's great. Thank you Barry.
Yes.
Your next question comes from the line of.
Okay.
Your line is open.
Okay.
Hi, good afternoon, guys and great quarter and also on the App.
It's pretty impressive I wanted to drill down on a previous question just on how you have confidence in that $4.3 billion in revenue is that a bottoms up analysis with like qualified customer lead indications of interest.
Contracts. They may have already been signed or is there more.
Or does that you actually have to go out and get before you can achieve that I'm wondering how you built for that.
It's both bottom up and top down on both directly and we see that growth will be very strong.
Again, even that because of the global <unk> growth should be much better than day and.
Pedro Pathak, we saw on Taiwan operation and we also.
Many more.
New Inc.
Engage.
High profile customer.
<unk>.
6 months and currently so we feel pretty optimistic of a day.
Okay, Great and I was going to ask.
How do you feel about your ability to pass through in this environment you talked about expedited shipping I know that you are doing airfreight last quarter, just to get things to customers on time I would think that everyone knows at this point that it's impossible to get things.
Without paying for extra shipping chartered so I'm wondering if you're planning on surcharges or other pricing methods to be able to pass that through to the customers and if so are they receptive to it.
Very good question and a complicated question too so.
So when you tie it <unk> possible to communicated per customer, but overall, we have of itself.
Sure.
I would have to say at least 50% of day, while maybe 50% per customer so we try to.
Kind of on.
By the customer very confident the way.
So that we can grow market share as well.
Okay, Great and maybe just 1 final 1 on pricing.
When do you think you can catch up on pricing to the higher input costs is it a quarter or is it too how should we think of the lag time before you are able to absorb all of that.
Again, it is a complicated question because OTA <unk>.
And still going on so that bad.
1 <unk>.
COVID-19, and I believe we will recover.
Carlo to normal but before that.
We are getting.
Able to pass those <unk>.
<unk> XR postal customer.
Otherwise they maybe 50.50.
In last quarter, and we have been getting better but hopefully.
COVID-19 program can be.
And the medicine so.
We will get back to non mall with medically.
Okay, great. Thank you and congrats again.
Thank you.
Your next question comes from the line of John Paul Smith for any color on if your line is open.
Alright, Thanks, very much can you hear me alright.
Yes.
Alright, Thats, great Thats on Charles sorry about that thanks, David So I can say is true I wanted to come back from second to the fiscal Q1 guidance and maybe to come at it this way I thought in some remarks, she made you referenced.
Like not declining.
In fiscal Q1, but I guess as we calculated it it's actually a bit below your normal seasonal trending pattern and that's after being pretty comfortably above that pattern in the last 2 quarters of both fiscal Q3 and fiscal Q4. So I guess my question is on 1 are we looking at those numbers differently than you are and maybe just.
Step me through what you meant when you said not declining and then 2 is there any constraint on your revenue guidance relative to component or logistical issues.
Perhaps could you quantify that thanks.
Yeah.
Sure I think that I think what our range does is our range allows for the struggles that we face in the supply chain. So so therefore.
We feel like we provided a broad enough range.
That that we can we can overachieve.
And we can also.
We feel comfortable with that range.
I guess the 1.
To affect any of the day, because we lost the COVID-19 vision, we do not adjust the inquiries that are already there.
<unk>.
So this year, we have a much bigger Saturday adjustment.
On employee not to wait and see.
Q1, Q2, you may see.
Days ago.
1 of the big posting because on Saturday.
And also Taiwan.
Ex patient so we hire people in Taiwan, and 10 people, but that they will have the ability to a contributor to our revenue and profitability.
Okay. Thanks.
That helps a bit I guess my other question just to come back to the gross margin for a second.
So.
To arrive at this $3 figure at north of $3 figure.
Especially based on what you are referencing on Opex there Charles I mean, the gross margin does need I think to be pretty close to 15%.
As we get out of calendar Q3 and into the remainder of your fiscal year.
I guess why do you think like do any of these things feel as though you have line of sight to them ending.
As we look beyond calendar Q3, and if not are you committing that you get $3. Some other way like we rein back on Opex or just maybe walk us through the interplay between why you might have comfort in the $3 number if you don't have visibility to some of these logistical issues or cost issues abating.
Debbie have items that sure. So 1 of the things that helps our cost structure again as is the movement of our.
<unk> over to Taiwan, So thats, we expect that to give us.
Give us benefit.
As well as the the traction in our new product offerings, which which we expect to bring higher margins than the traditional server business. So those are the factors that we have insight into and give us confidence that Joe.
In spite of.
Supply chain challenges, which we managed to meet and in spite of.
Higher costs, which we.
In terms of shipping and air freight, which we've continued to deal with.
We still believe that.
Net through price management that we can that we can achieve the margins, which will allow us to deliver the targets that we are forecasting.
Yes, the other way to answer your question most direct heading is that explain our growth will be significant.
E <unk>.
We are very confident to see that Hudson, but if in case that did not happen then that means we have too much of resource now so we may day.
<unk> seen some resources.
USAA headquarter I hope, but we don't want to do so by E. Mail, we had to we will and we have that option.
So that will help reduce our operating and coincidentally, Sheila I hope, but we don't want to go for it anyway.
Okay understood. Thanks, Thanks for the thoughts guys I appreciate it.
Thank you.
He has a follow up question from Magnus <unk> and CMT. Thank you. Your line is open.
Thank you just a.
Quick follow up I wanted to get your view on.
Current.
The memory prices.
Do you see.
The trend.
Over the next 1 or 2 quarters.
And I'm asking you book.
Availability and the pricing trends.
Heavy complicated complicated question about relative pricing is pretty big.
These momentum we see that available PDP is it getting better than last quarter. So on a price change is usually better than before.
As to when the price of west tougher growing on a price we're going from.
We watch very carefully sure at this moment no clear update by that.
At least we feel it's abated in last quarter.
Okay, and then I'm not sure either.
Yes, yes.
4.
The color I know it is very difficult to look beyond a couple of months.
As you think about your FY 'twenty 2 revenue guidance.
Sure.
I think about incremental opportunities the amount of growth.
AI type.
Projects that hi, crush skaters are expected to.
Ramp.
Do you think your FY 'twenty 2 revenue capture some of them or should we wait for FY 'twenty 3 to have it.
On to see a more meaningful material contribution.
Good question I mean for AI.
Bruce did it weigh out in.
On a fiscal 'twenty, 1 and <unk> pool, I believe will continue to grow very well may be more than 50% I hope right and in full payer co pay on colleagues and honorable territory.
We grew very well last year and I believe a D CEO.
Turning to our payer coping.
Well grow much better than <unk>.
<unk> nausea.
So that's a very strong area for sure as to heightened Charles.
Hospital hyper scale with our Taiwan operation now is rating. So we have a chance to start to service from Hyperscale customer.
<unk> by the IPD will be very selective for some day. They can protect them all when we can provide the value we will.
And Charles when you talked about does that include kind of on.
On a.
<unk>, 6 CPU or EU lump that.
Into the hyper scaler.
Segment.
Vanity huge flow question, but yes.
We are in some way.
We have some on the design is way up so you can cut from already pretty full on the solution. We have some published data on.
On the Bev.
Okay. So when you talked about AI.
It's not necessarily in on the solution is more general.
Many many STI Intel and AMD based on.
Moving to review Nvidia sure sure, but when you reference Hyperscale, there's that's per.
Predominantly on based solutions.
Our non necessary.
Hyperscale to us on steel.
86 menu.
Okay, Alright got it okay. So.
We candidly.
Really isolated because perhaps it's just too early to determine on base.
Independent on based solution right.
When customer needs that we we will have been weighted.
Got it okay.
Thanks for the details appreciate it.
Thank you.
Thank you for the last question, we have a follow up from Anthony.
At loop capital your line is open.
Hey, Thanks, Scott and follow up.
Just.
Wanted to ask any context, you can give us about how to think about revenue seasonality gave fiscal year 'twenty 2.
On.
Yes.
Seasonal pattern or will it be I mean, there will be a seasonal pattern, but we will be different than usual.
Daily ratable on a year over year basis.
Okay.
Yes, as you May know on September <unk>, we could see them. So it is no exception.
Although.
We have a strong demand.
Mobily shortage.
Mitchell.
We tried to be conservative.
When we share that number we see flow.
From a quarter.
And then Charles.
Through the rest of the year should we just assume typical seasonality.
To get to that.
And to the guidance range.
Yes basically.
Traditionally in December and June always saw a good quarter.
Awesome.
Hey, great I appreciate it thanks a lot.
Thank you.
Thank you.
This concludes today's conference call. Thank you for joining you may now disconnect.
Yeah.
Yes.
No.
Okay.
Okay.
Non.
Okay.
Yes.
Yes.
Okay.