Q3 2022 Super Micro Computer Inc Earnings Call
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Please wait the conference will begin shortly.
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Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.
At this time I would like to welcome everyone to the Super Micro Computer Inc. Fiscal third quarter 2022 results conference call.
Lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
I would like to ask a question at that time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question again press Star one. Thank you. It's now my pleasure to turn the call over to Nicole <unk> Investor Relations. Please go ahead.
Good afternoon, and thank you for attending different partners call to discuss financial results for the third quarter, which ended March 31st 2022 with me today are Charles Liang founder Chairman and Chief Executive Officer, Patrick Wang President East Coast SVP.
<unk> corporate development.
And Mike <unk>, Chief Financial Officer by now you should have received a copy of the news release from the company.
Distributed at the close regular trading and is available on the company's website.
As a reminder.
During today's call. The company will first share presentation is available to participants on the IR section of the company's website under events and presentations tab.
Also published management's scripted commentary on our website.
Please note that some of the information you hear during our discussion today will consist of forward looking statements, including without limitation is regarding revenue gross margin operating expenses other income and expenses taxes, how about allocation and future business outlook, including guidance for the fourth quarter of fiscal year, 'twenty, two and full year 2000.
20 Q.
Long term revenue goals and the potential impact of COVID-19 on the company's results of operations.
There are a number of risk factors that can cause supermicro its future results to differ materially from our expectations.
You can learn more about these risks and attach rates. We issued earlier. This afternoon <unk>. Most recent 10-K filing for fiscal 2021 and 10-Q filings made thereafter.
Our other SEC filings.
All of these documents are available on the IR section of Super Micros website, we assume no obligation to update any forward looking statements. Most of today's presentation refer to non-GAAP financial results and business outlook for an explanation of our non-GAAP financial measures. Please refer to the accompanying presentation or to our press release.
Earlier today.
A reconciliation of GAAP to non-GAAP results.
And in today's press release and supplemental information attached to today's presentation at the end of today's prepared remarks on the Q&A session for sell side analysts to ask questions I will now turn the call over to Charles Charles.
Thank you Nicole and good afternoon, everyone.
I am pleased to announce our quarterly revenue of one BD in a $1 three six BD in fiscal Q3, 2022, which was 51% year over year.
Gross and 16% quarter on quarter grows sequentially needs to read out.
Bob our guidance, given three months ago and above our recently updated range given two weeks ago.
Doug.
Five quarters of strong earnings indicated our total IP solution growth strategy is working well and we are only at the very beginning or a breakout.
No. That's a look at some of our key highlights from the quarter.
Plus again our FICO.
Third quarter net revenue totaled $1 6 billion up 51% and up 16% quarter on quarter, we are above our guidance range of one one to one two BD.
Superman closing fees on 16th quarter of plus to revenue correlation and we continue to execute our strong growth trajectory at that three to four times higher than the overall industry growth rate.
Our fiscal third quarter non-GAAP , earning per share was more than triple.
And it was.
One thought of 55 cents compared to <unk> two.
50 years ago. This one three and 10% growth was way up <unk> to higher end of our guidance range of 17% to 90 cents statements <unk> strong operating.
<unk> and our customers are accepting the value of our total solutions.
The growth in our major geographies.
It's well balanced.
And our reason that Taiwan expansion that can contribute to our beta operation margin and meeting our gross customer demands.
Our results in the past five quarters.
Knowing that we are ahead of our temp BD in Dallas.
Annual revenue target.
Shale.
Yeah, much and probably the PDP have been improving greatly as well since then.
Based on our current demand and capacity we are forecasting at least one full five BD and revenue for our coming June quarter. Two ended our fiscal 2022 on a strong note.
$5 billion yearly revenue.
Looking.
Florida ahead, I believe we will continue to have a strong.
Fiscal year 'twenty three in that range of six BD and two 7 billion.
Annuity and expect to reach our $10 billion.
<unk> revenue at least one year sooner than the original plan, we sale back in.
2021 March.
Sure that accelerate our revenue came from our success with our total IP solution in AI enterprise trial H telco.
And customers from many other verticals.
Riding on that strength and the foundation or Superman codes optimal BD and broke architecture. Our total IP solutions allow customers to quickly deploy E without going through the complications of design meditation sourcing and integration.
This strategy also positioned supermicro very public debris, hence the ongoing supply chain chatter.
Challenge compared to our competition.
Our Canadian barrels and the thoughts of the Golar igloo.
The economy of scale, we can create and deliver workflow optimized solution to customer.
With time to market advantage quality performance post and TCE or the vintages.
To grow our solutions and customer base faster and.
Increasingly we are on track with our commenced interface ultra com greater and B to B to C automation.
<unk>.
Many customers try and likened this intelligent database and waiver based service for many quarters.
This represents our next opportunity to scale up and scale.
Our application optimized solutions to many more customer <unk> seven.
No downtime and no manpower bandwidth limitation.
The <unk> automation program with the greater you launch nationwide in this months.
Next week I believe.
We have dramatically improved our engineering operation sales and service effectiveness.
And customer satisfaction, while accelerating our market share gains.
To enrich our total IP solutions product portfolio.
Tablet.
Our total year engineering resource in the past few years to build a new features to power our enterprise data center and OEM customers.
Our Super Karl composer and other Soto Airpods manage GPU compute.
Storage and networking to the broker as a cloud scale, including rich.
Rich analytics.
With data center operators to make critical data driven decisions to improve workflow efficiently.
Immediate and long term.
We see our investment in to rotate our center management Soto Aztec oil enables future.
Infrastructure service and monitor as a service functionality and they will further enhance our total IP solution to a PDP and value.
However, recent Taiwan and U S.
Expansion focusing on delivering a pin.
<unk> and <unk> 12 drag scale total IP solutions and Bohrium Pip.
Capable of shipping thousands of rigs per months directly Wuxi <unk> campuses.
Designed with security computing in mind, these energy saving rack scale solutions leverage yellow mid east <unk> and <unk> technologies.
More and more of our customers are able to run their data center with.
Close to one point or six or even better.
Customers can expect lower TCE by saving energy coast, while increased performance per megawatt India facility substantially.
In some cases, our customer inquiries computing capacity up to 50%, we see that same energy budget.
Many of which on this customers are quite happy to receive higher quality PRASM prey rate the products.
They are fleury optimize integrate and validated by <unk> Michael.
Hello, Andy organizations happy and hard at work to expand our new technology product nice with upcoming new entail Sapphire Rapids and AMD.
Processes.
We again are ready to bring <unk> to market advantages to our customers.
We are pleased to see a strong trend in some of our customers <unk> and early to put them into place.
Well, yeah, especially partner closely with Nvidia and other leading technology partners in the emerging <unk> and <unk>.
<unk> systems.
In <unk>, our GPU per dynamite, two supported is sleepy and a most Steve workloads.
With all the new technologies, including Pcie Gen Fi TX al.
<unk>.
The new 350 was CPU.
700, <unk> GPU, our portfolio of new <unk> from Forex scale total IV solution will continue to develop.
And become a key growth driver for our coming quarters in Es.
In closing.
Our 51% year over year revenue growth and $1 50 faced in quarterly EPS proved that our total IV solutions strategy has been gaining customers.
<unk> and trust in.
<unk> Tim.
We will continue to enhance our total IV solutions capability and value oil continue to lower our operation coast by debit as gene our Taiwan production capacity.
Our strong technical foundation.
Katy to employees.
So it will bring both solutions and application optimized the green computing products.
Quickly and consistently winning new customers.
And Dale satisfaction now.
More importantly, we invest in commencing the pace <unk> platforms will help us too much efficiently increase our customer base.
I'm not sure.
I and my teams will continue to execute our growth strategies and X rating in that timeline to reach $10 billion revenue target and shell too.
And start to plan and execute our new turnkey BD and mid term.
Midterm goal as well.
I will now pass the call to David Wigan Hello.
To provide additional detail on the quarter David.
Thank you Charles I am pleased to report solid fiscal third quarter revenue of $1 36 billion.
51% year on year increase 16% quarter on quarter increase our revenue exceeded our initial guidance range of $1, one to $1 2 billion and our recently updated range of one three to 135 billion. This.
This was our fourth consecutive quarter of revenues exceeding $1 billion.
Year to date revenue through our fiscal third quarter increased 43% year over year, our growth initiatives with total IP solutions targeting the fast growing markets and customers with accelerated GPU AI workloads software defined storage and networking.
<unk> and hybrid cloud and edge Iot platforms are gaining momentum.
These new growth drivers complement our traditional strength with enterprise channel and OEM customers, leading to accelerating revenue growth expanding margins and operating leverage.
Revenues for the trailing four quarters.
Q4, 'twenty, one through Q3 of fiscal year <unk> totaled $4 six 3 billion.
In the third fiscal <unk>.
Supermicro recorded balanced revenue across all three of our market verticals, demonstrating the resilient nature of our diversified end markets.
We achieved $846 million in organic enterprise and channel and AI and our revenues, representing 62% of Q3 revenues versus 64% last quarter.
It was up 44% year over year, and 12% quarter over quarter, which drove driven both by our growing list of large enterprise customers as new product offerings.
Our OEM clients and large data center segment achieved $423 million.
Representing 31% Q3 revenues versus 23% last quarter, which was up 54% year over year and up 54% quarter over quarter.
With strong growth driven by large new and existing data center customers and OEM appliance customers.
<unk> telco edge and Iot segment achieved 86 million in revenues, representing 7% of Q3 revenues versus 12% last quarter.
This was up 159% year over year and down 39% quarter over quarter.
This emerging segment represents a fast.
Long term opportunity for us and our design win momentum backlog continues to grow but short term quarter to quarter results can fluctuate depending on the timing of new customer adoption.
<unk> cash and cycles.
Systems comprised 85% of total revenue and subsystems.
And accessories represented 15% TCE revenues.
On a year over year basis, the volume the volume of systems and nodes shifts as well as system node ASP increase.
On a quarter over quarter basis, the volume of systems shift and system node ASP increase.
Total shipments were lower due to product mix.
We had a balanced distribution of revenues across geographies with the U S representing 56% of revenue.
Asia, including Japan, 23%.
Europe , 15%, while the rest of the world was 6%.
On a year on year basis U S revenues increased 53%.
Asia.
According to 2015 decreased 50% Europe increased 27% the rest of the world increased 180 folks.
On a sequential basis U S revenues increased 9% 19%.
Including Japan increased 9% Europe decreased 5% for the rest of world increased 124%.
The Q3 gross margin was 15, 6%.
Which was up 160 basis points quarter over quarter over quarter from Q2, and up 180 basis points year on year due to price discipline leverage from higher factory utilization.
And operators and operating efficiencies and a continually improving product customer this quarter.
Quarter on quarter and year on year increase in gross margin was.
Was achieved despite continued elevated freight and supply chain costs.
Turning to operating.
Q3, opex on a GAAP basis increased 7% quarter on quarter, and 14% year on year to $121 million.
On a non-GAAP basis operating expenses increased 6% quarter on quarter and increased 16% year on year to $110 million.
Our non-GAAP operating margin increased significantly to seven 5%.
Order versus five 2% last quarter, and three 2% a year ago demonstrated demonstrating both improvements in gross margins and operating leverage this.
The year on year and quarter on quarter increases on a GAAP and non-GAAP basis were driven by higher head count and personnel costs and lower research and development in our <unk>.
Other income and expense was $3 1 million.
Income consisting of $4 6 million in foreign exchange gains offset by interest expense of $1 5 million as compared to a $1 8 million expense last quarter.
This quarter the tax provision was $16 2 million on a GAAP basis, and $19 6 million and non-GAAP basis, our non-GAAP tax rate was 18, 7% last quarter.
Our tax rate for GAAP and non-GAAP purposes increased again this quarter, primarily due to a significant increase in pre tax income.
Fiscal 2022.
Lastly, our share of income from our JV with 3 million this quarter as compared to $22 million last quarter.
Q3, non-GAAP diluted earnings per share totaled $1 55, which exceeded the high end of our original the original guidance range.
79.
Our recently updated Q3 branches of $1 40 to $1 50.
The increases to Etfs were due to a combination of higher revenues.
Manufacturing efficiency price discipline product and customer mix and operating leverage.
Cash flow used in operations for Q3 was $228 million compared to cash flow used in operations of <unk> 53 in Q2 as accounts receivable and inventories grew due to increasing demand from our customers and to mitigate the continued impact of supply chain disruptions.
Including Capex of $11 million Q3 negative free cash flow totaled $239 million.
Key uses of cash during the quarter included increases to inventory and accounts receivable and a reduction in customer prepayments. This was offset by cash provided from increased accounts payable and short term debt.
We did not repurchase any shares in the quarter.
Our closing balance sheet cash position was $247 million.
That was $547 million as we drew down on our bank lines of credit to increase inventory levels as we ramped production of new throughout new platforms globally.
Turning to the balance sheet and working capital metrics compared to last quarter. Our Q3 cash conversions conversion cycle was unchanged at 98 days relative to Q2 and above our target range of 85 to 90 days due to higher inventories.
Inventory was 117 reps.
Representing a slight decrease of one day versus the prior quarter.
Days sales outstanding was up by two days quarter on quarter to 39 days, while days payable outstanding was up by one day to 68 days.
Now turning to the outlook for our business. We note that our Q4 June quarter is typically seasonally strong we are enthusiastic about several new customers and innovative new leading edge total it solutions ramping multiple end markets. We are carefully carefully watching the global macro.
Economic situations and impacts to the supply chain from continuing COVID-19 related disruptions.
For the course for the fourth quarter of fiscal 2022, ending June 32022, we expect net sales in the range of $1 4 billion to $1 48 billion GAAP diluted net income per share of $1 45 to 164 and non-GAAP diluted net income per share of $1.
101 to $1 69.
We expect gross margins to be similar or slightly up from Q3 levels.
GAAP operating expenses are expected to be approximately $121 million.
And include $8 million and stock based compensation and $1 million in other expenses not included in non-GAAP operating expenses.
Other income and expense, including interest expense.
Net expense of approximately $2 million.
A nominal contribution from our JV.
non-GAAP operating expenses are forecast to be up.
Quarter on quarter from continued investments in R&D and higher personnel costs.
The companys projections for GAAP and non-GAAP diluted net income per common share.
Our GAAP tax rate of 17, 4%.
non-GAAP tax rate of 19, 4% and a fully diluted share count of $54 3 million for gas and $55 79 shares for non-GAAP.
For the fiscal year ending June 32022.
Our raising our revenue guidance range from four two to $4 6 billion to a new range of $4 96 billion or $5 4 billion.
And raising our GAAP diluted net income per share outlook.
At least $2 77 to a range of 416 to $4 35, and our non-GAAP diluted net income per share from at least $3 20 to a range of $4 53 to $4 71.
The companys projections for gas annual net income assumes a tax rate.
<unk>, 5%.
Our rate of 18 seven for non-GAAP net income.
For fiscal year 'twenty, two we are assuming a fully diluted share count of $53 6 million shares for GAAP and $55 1 million shares for non-GAAP .
Outlook for fiscal year 2022.
Diluted GAAP earnings per share includes approximately $39 million in expected stock based compensation and other expenses net of tax effects are excluded from non-GAAP diluted net income per common share.
Finally, we expect Capex for the fiscal fourth quarter of 2020 to be in range of $10 million to $15 million.
Nicole we're ready for Q&A.
Operating cash less the line for questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.
Your first question comes from the line of Ananda Baruah with loop capital. Your line is open.
Hey, good afternoon, guys. Thanks for taking the questions.
Congrats congrats on the on the great execution first half of this calendar year. It sounds like there is good policy here.
If I could.
Hey, guys, Charles and David what would you guys.
First time, we've gotten the chance to talk to you guys since the pre announce what would you guys.
So you will consider to have been incremental.
Versus 90 days ago.
Illegal.
Got it.
Such strong revenue resume execution.
Both the March quarter, and now the June quarter, and then I have a follow up thanks a lot.
Yes, Daniel.
Is it because of the supply chain because as there always is some.
Invisible factor.
And that's why I mean.
In.
<unk> of millennium.
The March quarter.
But to be conservative but is to now.
We have many customers really like.
Yes.
Total solution and we shipped a lot of.
Completed ROIC, indeed, our rack scale Pnp.
<unk> grew a lot year over year.
Roughly this year compared with last CEO Hello.
<unk> scaled grew about five to six.
Slightly six times gross.
And this momentum at BD will continue to be very strong in the next 12 months. So we expect another three X who fight eggs rack scale Pnp product line growth. So that's why I mean the growth have been.
It'd either be surprise us.
That's great John Thanks, Charles and then Charles I'm, just going to ask you.
Sort of what are the next probably more natural follow ups since.
Yes remarks, but you will start to level three optical fiber.
Is the 17% to 23% long term growth rate is that still the appropriate growth rate.
Or shouldn't really be something stronger than that as you look out the next couple of years.
Next couple of years, it can be very strong, but again it depends on when our global supply chain situation as David just mentioned COVID-19.
A challenge for Us and also medical economical condition.
Even since there is not much was I believe.
<unk> <unk> continued to grow.
Okay. Thanks, Thanks, a lot I appreciate it thanks, so much.
Thank you.
This is Patrick I'm, just going to Dublin.
You also note that Charles also.
Talked about his expectations on fiscal 'twenty three.
And the implied growth rate there. So that's another data point of view.
Yes next year.
Fiscal two.
2023, and at this moment I believe.
Six BD and two 7 billion, we have relatively a very conservative.
S termination.
Your next question comes from the line of Mehdi Hosseini with Chi.
Your line is open.
Yes, Thanks for taking my question and actually I have a couple of follow ups Charles as you look into.
Next fiscal year, how do you see seasonal trend impacting the September quarter.
Instead, because youre doing really well, especially with diversification of revenue and I think it will.
Really help us.
We should think about seasonal factor and how you would set up the company for six to 7 million.
The revenue run rate in fiscal year, 'twenty, three and I have a follow up.
Thank you very good question indeed.
Traditionally you said timber whether it be our slow season, but this time can be quite different because we have a very strong packer order now and again local customer.
High profile customer <unk> Hello.
<unk> scale.
Are they in place solution. So we are preparing a big growth in this segment.
I believe this.
September we will have a great quarter.
It can be even more in June quarter.
Okay. Thanks for that color and then.
Question for David.
You've had three consecutive quarter of.
Cash burn in.
Given the strength in your backlog should I assume that youre going to.
Burnt kashagan.
June quarter.
Yes.
I think thats.
As our demand increases as we have to add accounts receivable and inventory.
Will we will continue to.
To use cash.
We are using it for customers and for inventory so we consider that.
Really strong usage.
Great. Thank you.
Yes.
Your next question comes from the line of Knowhow, Chuck sheet with Northland Capital markets. Your line is open.
Yeah. Thank you and congrats on the awesome results an amazing guidance.
But you say that the component availability situation has improved at all quarter to date or during the March quarter relative to the December quarter.
No.
Few months ago, we suppose to that situation will gradually improve.
Unfortunately, there are some parts.
I believe it will continue to be very tight.
Why we still suffering.
Supply chain.
A bit of a PDP program. Some component, yes have been dramatically improve but there are some other component of steel.
Serious shortage, so we tried to.
Improved as situations ratio.
Okay.
And so clearly guidance is indicating that there was no pull in of demand.
Especially in the context of how Intel guided and thus the share gains that you guys are putting up appear to be very sustainable still.
Still I would like to hear your pushback that supermicro is lower lead times and better management of these constrained components are not leading to these massive share gains that youre seeing at this point in time.
Indeed, it because.
Rapid scale.
And pray solution, we plan in advance <unk> customer understand the future demand and we plan in advance pro in.
Laura Devlin components in the events and then we.
We are able to ship that accompanied our direct to customer.
End of <unk>.
Efficient multi timing effects and in others. So at least I believe either one of the reason why we are able to go and we will continue to extend it.
The customer base to offer them.
<unk> scaled solution in feed we are prepare to toggle our drive scale capacity in the coming quarter.
Indeed in June quarter, So we feel pretty.
Strong net we will be able to have a customer that will happen to our supply chain challenge.
Okay, Great and then.
Cash consumption was actually in line with what I had expected.
And I presume that it was also in line with what you guys had expected given the revenue outperformance given the cash conversion cycle was flattish you requeue.
And is that correct.
Align with what you had expected given the revenue outperformance.
Yes.
And I would also.
We'll have to look out to Q4.
Planning our inventory levels. So so it is it is going in line.
The fact that we have.
It's a high growth rate, 51% year over year.
It is definitely going to continue to challenge.
Working capital.
Yep Yep and as such there has been no share buybacks right because all the cash is needed to finance the growth at this point in time.
Massive growth that Youre seeing.
Exactly yes exactly right.
Okay and.
Given that.
Cash consumption is tracking what you would expect given the revenue growth that youre, putting up does this give you incremental confidence to utilize that capital risk terms.
Track your non-GAAP earnings.
As opposed to waiting for a slowdown in the business before you can really start a share reached a purchase program in earnest.
Well, we all we also have to watch.
The overall environment and so we're trying to strike a balance.
Yes, we are talking about a possibility, but given the.
Make whole economic Steve I have a lot of unknown factor and that's why we tried to be very careful.
Alright, very good congratulations.
Thank you.
Your next question comes from the line of Jon <unk> with CJS Securities. Your line is open.
Hi, Good afternoon, guys. Thank you for taking my question and congrats again on a really great quarter and the outlook.
First question.
Well, it's great to hear that your component supply is getting better I was wondering how much of a corresponding drop youre seeing in component prices. If thats. The case and should we think of improvements on the gross margins going forward as well maybe towards the higher end target range.
Okay.
In theory, it's Hep C.
Because of the Covid situation in Asia, especially Taiwan, and mainland China as a kind of a very serious so.
I believe.
Uh huh.
It would have to say so although we are doing to outpace and believe situation will be getting in Peru.
Exactly how fast.
At this moment.
No much idea.
David.
Yes.
Yes, so the second part of your question John .
We.
We did we did experience.
Some gross margin expansion from higher efficiencies, which means that we actually we had.
We had higher throughput our factories at a lower per unit cost and so we do we do expect that to continue especially as we wrap up.
Production in Taiwan.
So we do look forward to further margin expansion.
Indeed, the one fact that weighting as you had before.
Taking these changes to share with everyone.
Our continuing growing in.
Our rack scale.
PRASM play at rack scale pulled out in beta with our current debt facility in USA 10 percentile on campus.
When patients continue on the growth most of the current capacity, we can support our revenue up to $12 billion.
So our capacity is a pretty enough so.
Looking for ROI and next minute quarter.
When our volume continued to grow our.
Gross margin and net profit will continue to gain advantage from the economical sites.
I don't think of scale I mean.
Got it that's great color. Thank you and it's really great to see that capacity.
Second question is regarding cash flow and some people have touched on this a little bit.
Is it in your interest to raise permanent financing to support the growth or are you just continue to use the revolver. How should we think about your ability to just fund the growth that youre seeing.
Yes, we are starting that plus PDP kind of.
It depends on the menu.
<unk> economic condition.
Economic conditions continue to be healthy and then we match had to more aggressively leverage the money from the bank otherwise.
We may continue to be.
Conservative.
Okay understood Congrats again.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad. Your next question.
Is from the line of Ananda Baruah with loop capital Your line is open.
Okay.
Hey, Thanks, guys for taking the follow up.
I guess.
Sort of piggybacking Charles off of off of over the last questions.
I guess, how much of how.
Yeah.
Sort of the revenue upside from the March and June quarters.
From new demand.
You may have been conservative about.
Relative to how much do you think was.
Yes demand that you've been getting indications about but that supply chain.
<unk> became available for <unk>.
And really I guess, what I'm trying to get a sense of.
How much.
How much of this is supply chain related.
Is the follows through.
Dependent to an extent.
New supply chain, continuing to get to get release ultra.
False.
Yes, very good question indeed, our demand.
Continue growing.
Stronger and stronger so we're not really big.
Limitation now in Tvs supply chain to us.
Sure.
So that's the way every day.
We have spent in time to figure out how to.
Improved our supply chain.
So lots of that situation and that demand is strong and keeping early and because of our.
Beta technology totals.
<unk> solution and getting very strong Soto add support.
That's really helpful.
And just a quick follow up there.
Yeah.
I've been jumping I guess I've been jumping between calls a little bit. So I apologize. If this has already been answered.
We have spoken to you in the prepared remarks, you mentioned.
The total IQ solutions being a catalyst for demand in general and I think actually completed racks, maybe even specifically in the prepared remarks, so any.
Any context, you can give us of that out.
Yes.
What youre seeing I guess like.
Like engagement contacts I suppose with with your client with your customers.
It's having the total IP solutions.
Be a real catalyst.
The reservoir right law and it looks like it may be.
Is the implication that it's showing up in an increasingly bigger well first half of this calendar year. Thanks a lot.
In feed the scale supply chain, David do you want to add.
SMC in the law.
Patrick.
<unk> been bothering us for many many quota as Illinois right. So.
At this moment.
Ill put into customer exists and CASM line, some new customer in <unk>.
Have a strong demand.
Uh huh.
We just had to work out.
Maybe you can add some single Apache.
Yes, so we are seeing.
Ananda, we're seeing really a lot of.
Hi, Matt.
<unk>.
Area and so those are the workloads.
That are being addressed there are solutions that we're providing are being well received by our customers and so.
The engagements that we're in.
That's the driver that we're seeing that AI has led our growth over the last.
Three to four quarters.
Yeah. This is Todd.
I will jump in.
So the supply chain topic, we've talked about.
Quite a bit.
Not unique to us, but I think we do have to do.
Kudos to shut us to be.
The operations teams here at supermicro, because without their hard work, we're not able to get the supplies we need.
On the other side.
The customers just really like our product.
We've got great products.
And we talked about strong backlog.
Talking about.
Targeting of top customers and we're seeing that play out and so the good news is that.
We've got great solutions to the customers really enjoy.
It is of our products.
Woods.
No.
So be it.
Very good results.
We're all pretty happier.
So I agree its supply chain and catch it for another two area. We will continue to seek out to study how can we update to the <unk>. How can we further grow our supply chain and more efficiently utilize our cash flow.
Excellent. Thanks, so much for the kind of it. Thank you guys.
Okay.
As there are no further questions at this time, ladies and gentlemen, Thank you for your participation. This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
<unk>.
Sure.
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Okay.
Sure.
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Yes.
Okay.
Yes.
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